The Hard Truth About Health Care

By Ezra Klein
Washington Post
June 6, 2011

http://www.washingtonpost.com/business/economy/the-hard-truth-about-health-care/2011/06/06/AG34XbKH_story.html

Everyone in Washington claims to want the same thing
lately: a "serious conversation" about health-care
costs. So let's have one.

Republicans have a plan that has been tried repeatedly
but that has never worked. Democrats have a plan that
might work in theory, but it is untested at the scale
they'll need for it to work in practice. And both
parties are too scared to talk about the only plan that
has worked.

But before we get to that plan, I want to tell you
about a graph.

I found it buried inside a Kaiser Family Foundation
brief entitled "Health Care Spending in the United
States and Selected OECD Countries." Inauspicious,
maybe. But it should change the way we think about
health-care costs. Because what it shows is that we've
failed. Failed to control costs. Failed to restrain the
growth of government.

And it shows something else, too: Where we've failed,
others have succeeded.

Everyone knows - or should know - that the United
States spends much more than any other country on
health care. But the Kaiser Family Foundation broke
that spending down into two parts: the government's
share and the private sector's share (both measured as
a percentage of total gross domestic product), then
compared the results to figures from 12 other countries
that are members of the Organisation for Economic Co-
operation and Development. And here's the shocker: Our
government spends more on health care than the
governments of Japan, Australia, Norway, the United
Kingdom, Spain, Italy, Canada or Switzerland.

Think about that for a minute. Canada has a single-
payer health-care system. The government is the only
insurer of any note. The United Kingdom has a
socialized system, in which the government is not only
the sole insurer of note but also employs most of the
doctors and nurses and runs most of the hospitals. And
yet, measured as a share of the economy, our government
health-care system is the largest of the bunch.

And it's worse than that: Atop our giant government
health-care sector, we have an even more giant private
health-care sector. Altogether, we're spending about 16
percent of the GDP on health care. No other country
even tops 12 percent. Which means we've got the worst
of both worlds: huge government and high costs.

This is where a "serious conversation" on health-care
costs would start - with what has worked, and what we
can learn from it. Instead, it's where our conversation
about health-care costs never quite goes.

The Republican plan, in fact, heads in the opposite
direction: The GOP outsources Medicare to private
insurers and gives senior citizens checks that cover
less and less of the cost of insurance every year.
Republicans hope that when faced with more cost
pressure and more options, seniors will be able to
exert the sort of consumer pressure that lowers prices
while retaining, or even improving, quality.

What they've got in mind already exists in Medicare.
"Our premium-support plan is modeled after the Medicare
Part D prescription-drug program," Paul Ryan (R-Wis.)
told me. But Part D hasn't controlled costs. Instead,
premiums have risen by 57 percent since 2006, and the
program is expected to see nearly 10 percent growth in
annual costs over the next decade.

Moreover, this isn't the first time we've tried to let
private insurers into Medicare to work their magic. The
Medicare Advantage program, which invited private
insurers to offer managed-care options to Medicare
beneficiaries, was expected to save money, but it ended
up costing about 120 percent of what Medicare costs.

The Democratic plan, conversely, quietly recognizes
that government-run health-care systems that are
willing to throw their weight around can control costs.
So the plan is to have Medicare try to pay for quality,
not volume.

The first step is figuring out what quality is. So
Medicare has been collecting vast amounts of hospital
data on patients' experiences, the delivery of pre-
operative antibiotics, the prevalence of medical
imaging and other topics. Come October, the hospitals
posting good numbers will get a bonus from the
Affordable Care Act; those posting bad numbers will
face a penalty. Next year, the bonus and penalty will
get bigger. Democrats have also created and funded a
center to start testing the effectiveness of various
drug, device and surgical treatments.

As for the inevitable political blowback, Democrats
created the Independent Payment Advisory Board, a panel
of 15 Senate-confirmed health-care experts who can make
tough, cost-cutting reforms to Medicare in Congress's
stead. To be stopped, Congress needs to vote the board
down, and the president needs to sign off on lawmakers'
opposition. That creates ample room for Congress to
hand the IPAB the decisions it doesn't want to make on
its own.

Could it work? Sure. But it's a gamble. It's easy to
imagine that strategy improving quality without cutting
costs. That'd leave us with a better health-care system
than we have now but the same budget problems. Another
danger is that Congress could override the IPAB,
rendering it useless as a tool for cost control.

But that's the choice we've been left with: a plan that
has never worked or a plan that's never been tried. As
for the approach that's helped every other
industrialized country achieve universal coverage at
about half our costs? Well, we're still not ready to
talk about that.

c The Washington Post Company

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