The Senate Bill: Better for Cost Control than the Status Quo

Cost Control Implications 

There has been substantial buzz about whether the proposed health care reform does enough to address the problem of health care inflation.

There is almost universal agreement that it does not do as much as we’d like it to do control costs, especially when we compare the health care reform in the Senate bill to each of our “ideal” version of health care reform.  Compared to the status quo – the Senate bill does much more that might lower health care costs.   This includes
- Medicare independent commission
- Substantial cuts in Medicare fee increases going forward
- Tax incentives to avoid overcoverage (Cadillac tax)
- Many pilots – each of which might show us the way to lower costs substantially.  Here is Atul Gawande’s take on the importance  of experimentation in controlling health care costs.
We have to start somewhere.

Nate Silver of has a good graphic showing his point of view about how preferable different health care reform proposals would be in his mind. I’ve taken his graphic approach – and applied the lens of “cost control” – so I am not giving “extra credit” for the dramatic decrease in the uninsured projected under health care reform.

There are a few things I would rank differently. I added “price controls,” since there is good evidence that price controls DO lower prices, although they often have unexpected consequences.  Here’s an interesting take by Uwe Reinhardt, pointing out that if we import drugs from Canada, we are ‘outsourcing’ price control to the Canadian government. Remember, Japan is the home of the $98 MRI because the government price book says that’s the price.

I also ranked a ‘weak’ public option as worse than the current Senate bill in terms of cost control. I continue to be worried that a weak public option merely fragments  the payer market further – and could lead to higher unit prices.

By the way, the market says the health plans “win” in the Senate bill, and their stocks are up sharply today.