Health Care Brawl: All or Nothing Doesn’t Work
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By Eugene Steuerle,
The Fiscal Times
January 18, 2011

In today’s world, health reform succeeds only if it goes hand in hand with reasonable budget constraints on health spending. But the debate beginning in the House today isn’t about benefits versus costs. Instead, it’s a winner-take-all spectacle like the Super Bowl. Vote “Yes” or “No” on rescinding recent health legislation. Yes or no on regulating Medicare. Thumbs up or down on the constitutionality of an “individual mandate.”

Besides giving thumbs a workout and brains a rest, what does winning one of these simplistic binary debates really mean? Recently enacted health care reform has hundreds of pieces, some better than others, and both the old system and the partially reformed new system need major repairs. Congress always regulates what it subsidizes; the real question is how to regulate best. And the individual mandate — requiring the uninsured to purchase coverage — is only one piece of the system of requirements that must be made to fit together.

Health care constantly evolves: in two or three decades, half of what we pay for might be totally new procedures, technologies or medications. So health policy must evolve too:

  • Adapt as do all forward-looking businesses and households.
  • Avoid the trap of thinking that any of us can tell the next generation how to manage almost one-fifth of the economy.
  • Maximize benefits within agreed-upon budgets.

And that’s where budget constraints come in. Simply put, you can’t maximize benefits relative to costs if costs are excluded from the equation.

Cost constraints drive innovation: We fix things when they have to be fixed. In the health care system, consumers start complaining about the high cost of limited-value care, insurance companies start demanding services at more reasonable prices, and providers find more efficient ways to provide care.

Conversely, costs can only go up unreasonably in a fee-for-service system in which patients and doctors individually decide what bills to pass on to fellow taxpayers and policyholders. Witness the tripling of health’s share of GDP from around 6 percent in 1965 to 18 percent in 2011.

Somebody has to get less or pay more, or some provider
has to accept less. Each political party always
wants the other to pick the losers.

Recent health reform did introduce some interesting experiments and new models. But, here again, these initiatives — like weight-control experiments on the value of exercise without limiting dietary intake — are unlikely to reduce cost growth if budget constraints aren’t in effect. Resisting normal budget constraints while insisting on conflicting standards of perfection puts Republicans and Democrats in a mutual bind. Relative to today’s mostly open-ended system, any cost-saving reform will necessarily generate some losers — somebody who has to get less or pay more, or some provider who has to accept less. Each political party always wants the other to pick the losers.

If simple budget principles guided policy, politics would adhere to a rule that each health program had to operate within a budget — one that would not grow automatically simply because private actors decided they wanted more services or private providers decided they wanted more money. That means that each health program must empower somebody — individuals, intermediaries or government itself — to say “No” to some prices and procedures to stay within budget. The legitimate debates — that really will never end in an evolving system — would then turn to the size of the budget and who should say “No,” to what and when.