For health policy that works, look at the evidence

When a policy generating a lot of fame and fortune starts to go wrong, the temptation to ignore new data can be irresistible. For over 50 years, mainstream U.S. health policy makers have promoted research supporting Kenneth Arrow’s 1963 assertion that “it is the general social consensus, clearly, that the laissez-faire solution for medicine is intolerable.” That is, only government intervention can reduce medical spending, raise medical quality, and provide care for all.

Evidence compiled since Arrow’s paper suggests that government is more likely to be the cost problem than the cost solution. Unfortunately, those invested in the proposition that government control lowers costs tend to avoid engaging with evidence that suggests the opposite.

{mosads}When was the last time you saw a careful discussion of the overhead costs generated by ObamaCare’s medical practice restructuring, payments controls, and data system requirements? ObamaCare’s architects claimed that U.S. health-care spending is too high because physicians and patients use too much of the wrong kind of health care. The “fragmented” U.S. health-care “system” prevented cost control overseers from rooting out overuse promoted by fee-for-service physicians and their overly demanding patients. Their suggested cure uses mandated reporting, payment changes, and new health information technology to force new, untested, incentive structures onto medical practices and patient care in the name of health system “transformation.”

The mandates created a system of “integrated” care depressingly similar to the centrally controlled health systems in other industrialized countries. It was designed to limited total health spending, develop tracking systems to control physician and patient behavior, and establish clinical pathways dictating the “right” tests and treatments for every single person. Unaccountable experts combine their notions of “value” with average results from population health studies to cut spending by deciding whether you should get the medical care you need.

In practice, the ObamaCare restructuring has forced the adoption of immature health information technologies, raising costs and exposing millions of Americans to identity fraud. It has imposed costly administrative burdens on clinicians with little evidence of a commensurate improvement in care. In 2016, Sinsky et al. reported that physicians providing ambulatory care in 4 specialties now spend two hours on electronic record keeping and other paperwork for every hour of direct patient contact. In response to spiraling administrative burdens, the American College of Physicians has called for quality-of-care impact reviews for new and existing administrative tasks imposed by oversight organizations, payers, and vendors.

There is growing evidence that ObamaCare’s substitution of government run care for private sector arrangements increases costs. Health coverage premiums were artificially raised when ObamaCare made many private coverage arrangements illegal. Eliminating those arrangements forced many people into Medicaid, likely reducing their access to physicians, preventive care, and high quality treatment.  

Charles Blahous has explored the expenditure side of Medicaid. He notes that a June 2017 Centers for Medicare & Medicaid Services (CMS) estimate of future Medicaid expansion costs predicts per capita costs will be $7,436 per person in 2022. In 2013, CMS predicted 2022 per capita costs would be just $4,875. Meanwhile, the Medicare Payment Advisory Commission (MEDPAC) estimates that one of ObamaCare’s more hyped health system transformations, Medicare Accountable Care Organizations, increased Medicare spending by $216 million in 2015.

How do ObamaCare proponents even know the U.S. spends too much on health care? People place a high value on health and physical functioning. Why not conclude instead that countries with long waiting lists for medical care spend too little on health care rather than that the U.S. spends too much? We know that before ObamaCare U.S. patients benefited from higher spending with more preventive care, faster diagnosis, more rapid access to curative medicines, a higher likelihood of surviving cancer, and lower chronic disability rates in old age.

What if private U.S. medicine was an efficient producer of actual medical care and ObamaCare’s transformation efforts make it more bureaucratic and less efficient? U.S. patients spend less time waiting for care than patients in other industrialized countries even though U.S. medicine operates with low per capita numbers of hospital beds, physicians, and nurses. U.S. health-care operates in a country with lower total tax revenues as a share of gross domestic product, a financing strategy that produces lower deadweight losses than one in which tax financed government programs provide all health care.

At the OECD, Lorenzoni and Koechlin calculated 2014 purchasing power parity health spending and pricing estimates for 11 countries. More sophisticated than the health expenditures as a percentage of GDP numbers so commonly batted around in U.S. health policy discussions, they suggest that U.S. health care may be more reasonably priced than previously thought. Its cost, in terms of the number of common currency units needed to purchase the same volume of goods and services in every country, is 14 percent higher than the OECD average, about on par with Great Britain and far lower than the cost in Canada, Switzerland, or Norway. U.S. purchasing power parity hospital service prices were on par with Canadian ones and lower than those in Sweden.

U.S. expenditure is high because it buys far more services per capita, about 30 percent more than in Germany and almost twice that of Canada. There’s waste in U.S. health care, of course, but is waste more likely in a system controlled by central planners spending other people’s money or in one where people spend their own money, with direct subsidies from taxpayers?

Mainstream U.S. health care policy recommends the equivalent of nationalizing agriculture to make sure everyone gets enough to eat. Instead, it’s high time mainstream health planners started thinking about the medical equivalent of food stamps.

Linda Gorman is director of the Health Care Policy Center at the Independence Institute (@i2idotorg), a free market think tank in Denver.