Wishful Thinking on Health Costs

By David Leonhardt
The New York Times
January 13, 2011

Opponents of the health law sometimes like to suggest that cutting health costs would be easy, if only we’d be willing to try common-sense ideas. But that’s wishful thinking. The law does include most of the common-sense ideas supported by health economists ranging from Mark McClellan (the former Bush administration official) to David Cutler (a former Clinton and Obama adviser). There’s just no getting around the fact that reducing the growth rate of health costs will be difficult.


By Don McCanne, MD

So many noted policy experts have trumpeted the supposed fact that the health reform law contains essentially all of the cost containment ideas known that now this concept is being accepted unchallenged. This ignores the fact that the most effective model of cost containment was rejected at the very beginning of the reform process.

Numerous microsimulation studies plus the experience of several nations has demonstrated that a single payer system (e.g., an improved Medicare for all) actually bends the cost curve down when contrasted with the fragmented, multi-payer system that we have in the United States.

These same microsimulation studies show that building on our current system, which is precisely what the current law does, is the most expensive model of reform, primarily because it retains the profound administrative inefficiencies that are a major contributor to our very high costs. Setting medical loss ratios recovers only a negligible portion of the administrative waste which permeates our system. The many other efficiencies of a single payer system, such as reducing the administrative burden on the health care delivery system, would recover much of this waste.

Another factor that is not receiving the attention that it should is that the current law can never result in truly universal coverage – tens of millions will remain uninsured. A single payer system not only costs less and slows the growth of health costs into the future, it also automatically covers everyone. Moreover, it uses progressive tax policies to ensure that funding is equitable, making health care affordable for everyone.

The popularity of Medicare is understandable, since it provides us with health security in our later years. But the projected spending increases in this high-risk pool are of concern. We could fix that problem immediately by diluting the costly Medicare pool with the couple hundred million of us who are relatively healthy.

We’re already paying for the Medicare pool anyway, so why shouldn’t we all have the advantage of an efficient health care financing system that eliminates the profound waste of our costly, dysfunctional, fragmented system of a multitude of private and public payers? An improved Medicare for all is the only practical solution to our problem of intolerable cost increases.


Re-posted with permission from pnhp.org.