The Health Care Choice
Sean Evans, Chair and Associate Professor of Political Science
Apr 22, 2011
Do you trust health care providers or yourself to reduce health care costs? This choice is the primary distinction between the dueling proposals of House Republicans and President Obama to reform Medicare.
House Budget Committee Chair Paul Ryan (R-Wisc.) proposes Medicare reforms that emphasize individuals controlling costs through a market-driven system. Ryan would not touch Medicare for those 55 and older. But beginning in 2022, all seniors eligible for Medicare will receive a voucher, progressively price-based on health and income, to purchase health insurance. Individuals will then search for the health insurance policy that best fits their needs as insurance companies offer cost effective policies to respond to this demand, much like the Medicare prescription drug benefit.
The Ryan proposal is based on the assumption that individuals will be more cost conscious if they pay for medical coverage. Currently, individuals have no reason to be cost conscious because most employers pay for health insurance, and insurance companies — not individuals — pay the bills. Requiring individuals to make health decisions will encourage them to reduce their use of the health care system and thus reduce costs.
The primary objections are that seniors will pay more for their health care, the voucher may not keep up with health care inflation, and finances should not dictate whether seniors, who have a greater need for health care, receive care. In essence, the Republican plan requires seniors to self-ration their care, including end-of-life decisions.
Obama proposes that health care providers and experts control costs. First, Obama creates incentives for Accountable Care Organizations that would bring hospitals, primary care physicians and specialists together to better coordinate care. Rather than being paid per procedure, ACOs would be paid a set amount per diagnosis, providing them incentives to control costs.
One problem with this proposal is the focus on outcomes, which encourages ACOs to cherry pick healthy patients. Cost containment, meanwhile, would only work if participation is mandatory — which would make ACOs "new and improved" HMOs with the same old problems.
Moreover, the push toward the consolidation of health providers creates fewer, larger health care providers and reduces competition. This consolidation increases the ability of ACOs, as the dominant provider in an area, to set higher prices and thus lessens cost containment.
Second, Obama wants to strengthen an independent board's ability to reduce Medicare costs if targets are not met. The board would use cost effectiveness research to determine the best, most cost effective treatments and only cover certain drugs and procedures.
The primary problem is that to meet targets the board would have to make decisions denying treatments that would be politically unpopular. Moreover since Medicare costs are greatest at the end of life, the independent board's decisions would deny life-extending treatment to very ill patients. Finally, it would bureaucratize health care and reduce quality of care by replacing individualized care with standardized practices.
Overall, Obama hopes his Medicare reforms reduce costs by driving changes throughout the health care industry as insurance companies adopt Medicare's cost containment reforms.
Due to Baby Boomers retiring and longer life expectancies, both Democrats and Republicans admit that we must reform Medicare. Frankly, both plans are risky, and the eventual solution will probably include elements of both. But the basic question remains: Do you or your provider make your health care choices?
This article originally appeared in the April 22, 2010 edition of The Jackson Sun