Sunday, July 11, 2010

Different Objectives

Reason's Peter Suderman has a great little post from the other day on why Obama care might not succeed in controlling costs. The problem, as many critics have pointed out, is that the law focuses first and foremost on expanding coverage. More Suderman, comparing federal law to Massachusetts, where health insurance premiums have skyrocketed under their smaller scale version of the national plan:

Yet payment-system reform of any kind still faces tremendous hurdles—the main reason being that while just about everyone pays lip service to the idea that we need to cut medical spending, no one wants their services or payments to be cut. Doctors, naturally, want to keep getting paid every time they do something, and patients, who typically don’t shell out directly for the bulk of their medical costs, want doctors to have the fee-for-service system's incentive to do more rather than less. At the same time, politicians don’t want to be seen as shorting doctors, or as passing payment plans that might reduce consumer choice.

That leaves insurers stuck in the middle. The increased costs of care and the increased costs of regulation lead insurers to increase premiums. But steadily increasing premiums, as well as a reputation for stinginess with reimbursements, tends to increase public antipathy toward the entire health insurance industry. That makes insurers political targets, which leads to moves like Gov. Deval Patrick's arbitrary rate caps. Along the way, the whole system begins to break down—and all the while, costs are still going up, and no one has figured out a way to hold them down. When it comes to rising costs, RomneyCare has certainly forced the issue—but only by making it worse. Expect the federal overhaul to do the same.


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