November 28, 2011

EITHER A THIRD WAY SOLUTION OR A SECOND:

Pay More, Get Less (Robert Samuelson, 11/28/11, RCP)

What propels U.S. health spending upward? The OECD's answer comes in two parts: steep prices and abundant provision of some expensive services. In 2007, an appendectomy cost $7,962 in the United States, $5,004 in Canada and $2,943 in Germany. A coronary angioplasty was $14,378 in the United States compared with $9,296 in Sweden and $7,027 in France. A knee replacement was $14,946 in the United States, $12,424 in France and $9,910 in Canada. Knee replacements in the U.S. were almost twice as common per 100,000 population as in the rest of the OECD. So were MRI exams and angioplasties.

This is a devastating portrait. At times, the U.S. health care system delivers the worst of both worlds: pay more, get less. Unfortunately, the message isn't new. America's fragmented and overspecialized health system maximizes returns to providers -- doctors, hospitals, drug companies -- but not to society. Fee-for-service reimbursement allows providers to reconcile their ethical duty (more care for patients) and economic self-interest (higher incomes). The more they do, the more they earn. Restraints are few, because patients and providers both resist limits on their choices. Government regulators and private insurers are too weak to control costs.

Countless thousands of conscientious doctors provide most Americans with good care and some with superb care. But the system needs a fundamental overhaul to deliver more value for money. There are essentially two ways to do this.

One is a voucher system that, through tax credits and fixed Medicare premium subsidies, would allow patients to shop for the best health plan. Competition, the theory goes, would force hospitals and doctors to restructure the delivery system; health plans would compete on the basis of price and quality. The other way is a government-run, single-payer system that would -- somehow -- include strict budget limits on doctors, hospitals and other providers. Lower administrative costs alone wouldn't provide enough savings to control overall spending. If open-ended reimbursement survived, so would the existing system.

Posted by at November 28, 2011 6:14 AM
  

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