21.7.09

THINK IT THROUGH. Professor Mankiw responds briefly to a criticism from Ezra Klein that provokes a logic lesson from The Glittering Eye. Lost amid the banter: economic substance.

There are at least four ideas in the health-care reform debate that have the potential to deliver on long-term savings. Mankiw does not make mention, or even reference an awareness, of any of them.

There's the theory that comparative effectiveness review -- particularly when combined with a new IT infrastructure that could eventually help guide physician decisions -- will cut down on unnecessary treatments and allow us to bring high-spending regions of the country into sync with their low-spending brethren.

Market tests also perform such comparisons, and investors can ask whether higher spending reflects greater demand for services, from, say, older people with additional aches, or from a high local birth rate. Perhaps a review panel can capture the essential elements of a market test. In a short column, there may not be space to make that case.
There's the idea that the Independent Medicare Advisory Council will be the locus for a continual process of Medicare reform that will begin to bring down costs in the Medicare program, and also create a sort of "best practices" laboratory where experiments can be attempted and the best efforts can be further developed.
Yardstick competition. Has that ever worked, or is it still a talking point?
There's the argument for the public plan, and in particular the public plan with Medicare powers, that implies that a large purchaser in the center of the system could bargain better discounts with providers.
I believe that's a monopsony.
There's the argument that the health insurance exchange will grow to become the primary insurance market and that as insurers begin competing on grounds of cost and quality -- as opposed to risk selection -- that efficiencies will emerge and spending will drift downward, and over time, the employer-based market, which is responsible for many of the costly problems in the system, will begin to migrate toward the exchange.
Isn't risk selection a dimension of quality that affects cost?
All of these are speculative.
Indeed.

No comments: