[Mb-civic] Bush's Turn to Health Care - Sebastian Mallaby -
Washington Post Op-Ed
swiggard at comcast.net
Mon Jan 16 04:33:34 PST 2006
Bush's Turn to Health Care
Is the President Ready to Expand the Public Role?
By Sebastian Mallaby
Monday, January 16, 2006; A17
This time last year, President Bush was preaching Social Security
reform; that got nowhere. This time six months ago, his team was
thinking tax reform; it soon got cold feet. Now the new theme is health
reform. "This is a big priority for the president," Al Hubbard, the
White House national economic adviser, told me Friday. "The system has
got to be reformed."
He's right, of course. The U.S. economy as a whole is extraordinarily
efficient: Since 1995 productivity has grown twice as fast as in the
1980s and 50 percent faster than in euro land. But U.S. health care is
the opposite. It's notoriously inequitable, it generates tens of
thousands of fatal errors annually, and it's unbelievably wasteful. It
achieves shorter life expectancy than the British, French, German,
Canadian or Japanese systems, but it eats up 16 percent of the resources
in the economy, compared with between 8 and 11 percent in those other
countries. The difference -- 6 percent or so of economic output --
suggests that the waste in the American system comes to $700 billion a year.
Back before Bush was elected, Hubbard convened a private-sector group to
wrestle with this challenge. He recruited three academics -- R. Glenn
Hubbard of Columbia University and John F. Cogan and Daniel P. Kessler
of the Hoover Institution -- who continue to influence Hubbard as he
ponders what Bush should say about health care in the forthcoming State
of the Union address. Conveniently, the trio's thoughts are not a
secret. Their five fixes for health care have just been published as a
Some look at the U.S. health mess and see a failure of the market, but
the authors insist that government clumsiness prevents the market from
working. Modest tort reform would free doctors from practicing expensive
defensive medicine. Tougher antitrust policies would prevent
price-raising alliances among hospitals. Pruning mandates on health
insurers -- which often reflect lobbying by doctors' groups -- might
free insurers to cover only the most cost-effective procedures.
So far, so plausible: Nonpartisan health experts agree that these ideas
push in the right direction. But they don't push to the goal line, nor
anywhere near it. By the authors' own estimates, the proposals eliminate
only a fraction of the waste in the American system.
Enter the authors' really big idea -- the one on which the White House
is likely to build a story about its grand health-reform vision. To make
the health market work, the trick is to create and then empower
consumers. You create them by making individuals pay more out of pocket.
And you empower them by forcing hospitals and doctors to publish
information on quality and price.
The idea appeals to Al Hubbard, a bluff, no-nonsense business type with
a genial, uncomplicated style. Hubbard invited me to imagine a world in
which companies paid for their staffs' groceries: Employees would load
up with more food than they needed; supermarkets would seize the chance
to mark up groceries; pretty soon, they wouldn't even bother posting
their prices. So it is today with medicine. You don't know the cost of
your hospital visit until a few days later, when the bill arrives.
There's a weakness in this thinking. The country has moved far enough
already toward out-of-pocket payments, which promise hardship for
low-income people without much reduction in waste. Health is simply too
complex for people to make smart, waste-reducing decisions; when you go
to the hospital with screaming stomach pains, you have no idea how many
tests you need -- and you're not in a fit state to embark on comparative
shopping. A celebrated study by the Rand Corp. showed that out-of-pocket
payments deter needed health consumption as much as wasteful
consumption, confirming the point that ordinary people aren't going to
become savvy health shoppers.
But the White House is right to press hospitals and doctors for better
information on price and quality. Limited state-level experiments
suggest that public ratings shame the poorest performers into rethinking
their procedures; doctors want to help their patients, and if they are
confronted with evidence that they are failing to do so they are willing
to shake themselves up. A few health plans have begun paying bonuses to
hospitals and doctors that score well on quality and price measures. A
recent study led by Harvard's Meredith B. Rosenthal found that these
So the White House is half right. If it sticks to the good bits of its
program, it could help bring down health care inflation -- which in turn
would create more space for wage gains and would also stem the growth in
the ranks of the uninsured. But this still raises a nagging question.
Beyond the imperative of restraining prices, the biggest challenges in
health care are to get insurance to everyone and to create incentives
for preventive treatment -- even though prevention may pay off 30 years
later, by which time the patient will have gone through multiple
switches in health plans. The most plausible subsidizer of universal
insurance is government, and the only entity with a stake in lifelong
wellness is the government. Is the administration ready to see that?
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