"Five cost controls in the Senate health-care bill."

Clio the Leo

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Thu Dec-17-09 09:42 PM
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"Five cost controls in the Senate health-care bill."

Five cost controls in the Senate health-care bill

One of the impulses you have to resist as a writer is the desire to say things that are new, as opposed to things that you've already learned. A lot of this post will be stale to longtime readers, but in my chat today, someone asked after the cost controls in the Senate. A bit later, I was on the radio and heard Darcy Burner say that this bill lacked any real cost controls.

Herewith, a partial list of the cost controls in the Senate bill:

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Under bundled payments, the hospital would receive one check for everything related to your stroke over a single period of time. That means they make more money from doing less, rather than more money from doing more. It also gives them an incentive to coordinate care when you're out of the hospital, as it's cheaper to get a nurse to call and make sure you're taking your medicine than it is to have you in for a follow-up procedure.

<snip>

Prudent purchasing means that insurers can't enter, or stay, in the exchanges unless regulators are satisfied that they're doing a good job. That works both to ensure a good product, but also to hold costs down. If an insurer wants to hike premiums, for instance, they have to submit a justification to the exchanges and post that justification publicly on their Web site. If the exchange isn't convinced, that insurer can be dropped from the exchange, losing all customers and profits they were making.

Do this to one or two insurers, one or two times, and the message will be pretty strong.

One reason there's so much packed into this iteration of health-care reform is because it's so hard to overcome the status quo outside of a massive reform effort. Common-sense delivery system reforms don't attract sufficient interest to muscle pass interest group opposition. The Medicare Commission streamlines the reform process, forcing a panel of independent experts to suggest a package of reforms in years when spending growth is too rapid and forcing Congress to vote on the package -- no amendments, and no filibuster.

The Medicare Commission enjoys a catalytic interaction with other elements of the bill, as it offers a process to take small programs and convert them into systemwide reforms. A pilot program that's working well, for instance, might be included in the next year's reform package, making it a policy that makes Medicare work better. This policy could be made a lot better if the Senate passes the Rockefeller-Lieberman-Whitehouse amendment.

The excise tax on high-value health insurance: This is, essentially, a tax on the unchecked growth in premiums. The key here is that the threshold at which premium dollars begin getting taxed at 40 percent doesn't rise as quickly as premiums costs generally rise. Now imagine two insurers: One holds costs down quite well, and one holds costs down quite poorly. Within a couple of years, the costlier insurer's plan is $3,000 over the threshold, while the cheaper insurer remains under it. The tax amplifies the difference between the two. The costlier insurer is suddenly $4,200 more than the cheaper insurer. In this way, plans with more successful cost-control mechanisms get an even larger market advantage. This makes the insurance market even more competitive in terms of price.

The individual mandate: In the last few days, an odd argument has arisen. The individual mandate, people say, must be sacrificed on the altar of cost control. The truth is quite the opposite. First, the individual mandate lowers average premium costs by bringing healthy people into the system. If the only people buying insurance are the people who expect to need to use it, the average cost will be prohibitively high. But second, the individual mandate is the political spur for future cost controls.

http://voices.washingtonpost.com/ezra-klein/2009/12/five_cost_controls_in_the_sena.html