A market-based effort to control health care spending would provide Medicare beneficiaries with fixed subsidies, rather than the current system’s open-ended ones, a trio of conservative health economists said Wednesday.
The economists said in an online paper for the New England Journal of Medicine that while the 2010 federal health law aims to slow health spending through programs such as value-based purchasing and bundled payments, it fails to alter fundamentally the health care financing system. The paper was authored by Joseph R. Antos of the conservative-leaning American Enterprise Institute, Mark V. Pauly of the University of Pennsylvania, and Gail R. Wilensky of Project HOPE, a former head of the Medicare and Medicaid programs.
Their perspective appeared alongside a paper by 23 economists and health policy experts brought together by the liberal-leaning Center For American Progress who came up with a different prescription for curbing health care costs. The CAP group called for state spending targets; competitive bidding for medical devices, laboratory tests and other Medicare services; and changing the traditional way doctors and hospitals are paid for every service.
Journal editors said they presented the differing approaches to stimulate conversation about how best to deal with health care costs.
The conservative thinkers said that changing Medicare from a defined benefit to a defined contribution approach would give seniors an incentive to choose lower-cost plans, and give plans an incentive to provide more cost-effective services. Their proposal is similar to that espoused by Rep. Paul Ryan, R-Wis., and incorporated into the budget plan of the Republican-controlled House.
The economists did say, though, that setting statutory limits on subsidy growth—such as the gross domestic product plus 0.5 percent limit in the Ryan plan—can sometimes be problematic because they can threaten access to care and “medical progress.” Those problems are common to all formula-driven spending controls, including the health law’s Independent Payment Advisory Board, they added.
“If competition can keep Medicare spending within the bounds set by the targets, then the targets are unnecessary,” they said. “If not, price controls will do no better.”
The economists also recommended narrowing the unlimited tax subsidy for employer-sponsored insurance—under which most employees do not pay taxes on such coverage—which they said would have a similar effect.
“Reliance on competitive markets rather than on regulatory controls provides strong incentives for more efficient delivery of the health services that consumers truly value,” they said.
In their paper arguing for a market-based approach, the economists said that seniors in Medicare would receive a subsidy to purchase insurance from a variety of plans that include traditional Medicare and all of which provide a core set of benefits. The subsidy would be based on the low bids and would vary based on financial and health needs. Beneficiaries who wanted to buy a more expensive plan would pay the difference on their own.
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I know how he feels if I lose my job my insurance is gone too. But people should know about “Penny Health” and also if you dont have means of paying for treatment the hospital will file the form and get reimbursed by medicaid.
Purchasing medical care or even plans to cover medical care seems to fail to meet the requirements for a competitive market–identical products, many buyers and sellers (esp not so many sellers), free entry and exit from the market (some buyers really need care or coverage), and perfect information. As a doc, I am seeing more and more people with inadequate coverage with serious conditions like cancer that make them unable to shop rationally for care. Sadly, people face unpredictable medical expenses (like the victims in Colorado), and I seriously question whether these market based approaches will work. The only people I have spoken to who like them are ones whose employers give them account to pay the increased deductibles and coinsurance or ones who have been lucky enough not to need much medical care.
Dr. Feinberg, I do appreciate your thoughtful comments about how market-based health care really works! I think there is very little individual consumers can really do in choosing their health care coverage
The free market mechanism works best when one identifies in advance what the benefit package contains and what the limits of entitlement are for what outcomes at what cost are to be funded. The only such approach in the USA is the Oregon Health Plan. The United States has a complex Federalist system where health care laws controlling the rule of law for professional fiduciary trust relationships are created by the states while the Medicare power of the purse is in Washington. Hopefully Oregon with its bottoms up approach to a defined basic benefit package that could be expanded to private sector health plans may bring a real world approach to medical care. Compromise is something the Oregonians seem to approach in a real world approach.
Will these “conservative economists” promise that their market-based “lower-cost plans” will offer guaranteed issue, community rating, and no rescission? No, I didn’t think so. What makes them think that these “lower-cost plans” will be available, will actually be of sufficiently low cost that seniors on fixed incomes can afford them, and will actually offer sufficient coverage for the elderly infirm? And what makes them think that ill and infirm elderly will be capable of choosing among competing plans that will be selling to them rather than explaining to them and helping them choose? There are things the market just can solve, and health care is one of them. This is simply another way for right wingers to shift spending to those absolutely least able to bear it. Nothing more, nothing less.