Separating “Cost Control” From Cost Control

Yesterday a group of freshman Senators unveiled a cost-control package of amendments designed to allay fears that the cost control in the Senate health care bill had been gutted. Economists whose support the White House coveted have grown more wary of the bill because of a de-fanging of the Independent Medicare Advisory Board, which would only be authorized to act when Medicare spending exceeds the rate of overall health spending, which never happens. IMAB also would be limited on what recommendations it can make. The economists have other concerns, about the “pilot projects” on delivery system reform not being wide enough in scope, and about financial penalties for hospitals which have high readmission rates being too low.

Atul Gawande, whose New Yorker article on health care costs provided a lot of the intellectual force behind moving forward on these reforms, argues in the latest issue that there is no one way to control costs, and that the demonstration projects are crucial to collect data on what works. Eventually, says Gawande, these projects will lead to results. To that end, the White House has praised and encouraged the efforts of the 11 freshman Senate Democrats. David Leonhardt similarly praised cost control efforts in the New York Times today:

The real problem with the Senate bill is that it doesn’t go far enough to cut costs and improve care. Here too, however, there are positive signs. For months, centrist Democrats have been saying that cost containment was one of their biggest priorities, but they had not done much to help the cause. That has now started to change.

“Senators are now really focused on cost containment,” says Mr. Cutler, who has been advising some of them.

The day before the Senate defeated the home health care amendment, Senators Collins, Lieberman and Specter introduced an amendment with some measures to push medicine away from the insidious fee-for-service payment system. The cost-cutting momentum continued on Tuesday, when 11 of the 13 freshman Democratic senators announced their own package of measures. Neither proposal is earth-shattering, but both would make a difference.

You can read Leonhardt’s entire article for examples.

The problem is that cost control, from the perspective of both the proponents and the opponents of specific policies, is playing out along very narrow lines. Take the debate over the excise tax for high-end insurance plans. Unions and other detractors say it will hit middle-class workers, particularly middle class union workers, and supporters say it will reduce the amount of large insurance plans out there and reduce overall costs. In reality, the most likely path is that Congress will treat it like the alternative minimum tax and raise the threshold over and over again to protect the middle class from being hit with it. So those arguing against the tax know they’re in the driver’s seat, and those arguing for it aren’t being honest about the true budgetary savings.

But today, the Senate will vote on an amendment that is a clear cost-control measure, and yet the Obama Administration, or most of the cost-control reformers, aren’t touting it. That would be Byron Dorgan’s drug reimportation amendment, which would save the federal government $19 billion and consumers $106 billion over ten years. This measure simply attacks the source of much of the bloat in health care – exorbitant profits that would lower if we had a single purchaser of health products.

Other countries pay less for prescription drugs because they by and large have a single reimbursement negotiator bringing drug prices down. When David Vitter argues for reimportation on the Senate floor, he’s arguing for single payer:

Many of these drugs were invented by American companies and produced in American factories. But Canada gets them at a discount. Why?

Well, Canada’s government bargains its prices down. So does the French government, and the German government, and the British government. The results of this strategy are not in doubt: These countries pay far less than we do for the exact same drugs. Our solution? We will go to these countries and buy these drugs! […]

But Medicare, and the federal government more generally, are barred from doing the same. And this isn’t just about drugs. The story is similar for everything from surgeries to doctor’s visits. It’s just harder to ship those over a border, and so there’s no demand to do so. But we could bargain prices here as surely as they can bargain them there. The fact that we can’t mimic Canada’s prices through an inefficient and illogical program doesn’t mean we couldn’t do it through a straightforward and logical one.

In closing, Vitter urged the Senate to “take this step and do what we all say should be a top priority and actually lower health-care costs. I urge all my colleagues to come together and do this in a bipartisan way.” Boiled down to its essentials, Vitter just made a case for a bipartisan embrace of a single-payer system.

And that, essentially, is what actual cost control would look like – using collective bargaining power to drive down costs on the stakeholders providing medical care in this country. We spend more on health care because we pay more for health care services. Figure out how to bargain that down – the way every other country in the world does – and you can figure out how to lower costs. The independent boards and high-end excise taxes and accountable care organizations are just work-arounds for that simple goal. Unless political leaders are willing to make the powerful industries that provide the US its health care system take lesser profits, all the work-arounds in the world are probably not going to be enough.

Exit mobile version