May 18, 2013

NOW UNIVERSALIZE IT AND SHARE THE SAVINGS:

The Health Spending Decline. (WSJ, 5/13/13)

A more plausible explanation is offered by Michael Chernew and some Harvard colleagues. Their model suggests that market choice and competition helped produce the slowdown, especially among Mr. Obama's preferred villains. Hide the children: the insurers.

Dr. Chernew investigated changes in the insurance mix at large businesses from 2008 to 2011. Even as these firms did better than their smaller counterparts, their workers shared more of the costs of their own care through higher deductibles, co-pays and new benefit designs. "Rising out-of-pocket payments," he writes, "appear to have played a major role in this decline, accounting for approximately 20% of the observed slowdown."

In a word, patients make better decisions when they have the right incentives and information. 

The future of heath care is driven by two simple truths: (1) every modern democracy provides universal health care and (2) people in developed countries don't need much health care until end-of-life.  

Designing a system that accounts for those two truths could hardly be more straightforward--folks need to have catastrophic coverage for when they truly need health care but the rest of the time as much as possible of their "health care" dollars should be saved and invested for the future.  The opportunity to keep those dollars for themselves will drive greater efficiency throughout the system.

Posted by at May 18, 2013 7:06 AM
  

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