UC-Berkeley economist Brad DeLong asks the a tough question re ACA implementation:

I understand that [Centers for Medicare & Medicaid Services] has absolutely no desire to encourage more cream-skimming, and every desire and internal incentive to make sure that those who treat more difficult patient populations are not financially penalized by doing so.

I understand that as a country we are spending twice as much as western European countries while lagging 2 years behind them in life expectancy and 20% behind them in treatment coverage. I understand that the hope is that it will be cheaper and quicker to treat your 32 million new Medicaid and exchange-based insured now that they are showing up regularly with insurance rather than showing up in severe crisis only.

But Massachusetts has been walking down this exchange-and-public-program-expansion road for six years now, since Mitt Romney signed RomneyCare. Massachusetts has been vacuuming up doctors and nurses from Costa Rica and elsewhere and still has been finding that the cost of treating your state population is higher when 97% are insured than it was when 88% were insured. And there aren’t enough loose doctors and nurses in the rest of the world for the ACA to vacuum up enough of them to meet the needs of not 1 state but 50 states.

The investments in medical infrastructure and workforce–less than $30 billion for 32 million newly insured, less than $1000 for newly insured–seem an order of magnitude low.

What is your guess as to what will happen if the ACA works for access, works for quality, works for coverage–but the extra health-care workforce needed isn’t there, and the lines start to get longer?

A few thoughts related to Brad’s question:

1.  Cost control:  We have to get a handle on cost growth.  The trend is unsustainable and the absolute amounts are getting out of hand.  My former employer covered 100% of policy premiums (nice!) which amounted to $1400/month for a family of four.  Where the heck does the money go?  Yes, we’re being billed average cost for families in the pool but still, where the heck does he money go?  That’s almost $17k per family per year.  Where does that average come from?  Are we talking $170k per ten families?  $1.7M per 100 families?   What are the events and treatments which drive the cost?  My guess is that, if you looked at a histogram of expeditures per family, most of the population would be found at low expenditure but that there’d be a tail toward higher expenditures and, if looked at the intergral, a big fraction of the total health care expenditure would occur in that right tail – even though there weren’t many families which fell in that region.  So if you’re going to cut costs or reduce cost growth, where do you look?  Do you try to reduce the cost of ‘typical’ procedures by a modest amount or do you go after the big ticket expenditures incurred by just a few people.  Either way somebody’s likely to feel a pinch.  How do you choose who gets pinched?

2.  There was Frontline show a few years ago, Sick Around the World, where Washington Post correspondent T.R.Reid visited the UK, Japan, Germany, Taiwan, and Switzerland and reported on how they delivered health care.  If nothing else it was eye-opening.  I have to admit that by the end I was bit discouraged in that it seemed to me it would be much easier to start from scratch than to reform our current system.  It was a good show.  Watch it if you get the opportunity.

3.  I’ve heard MIT economist Jonathan Gruber on the radio a few times – links here and here.  His focus is the economics of health care. His analyses seem very sensible.  (Check out his MIT webpage.  There’s quite a bit of information there.)  His recommendations for getting costs and expenditures in line include taxing ‘high end’ employer-provided plans.  That seems entirely reasonable to me.  Employer-provided health care is a benefit.  It is not inappropriate to tax employee benefits.  He also suggested that high deductible plans reduce cost without adversely affecting health.  As best I can tell (from the limited attention I’ve given to the details) this finding came from the Rand Corporation’s Health Insurance Experiment (HIE).  The HIE was conducted between 1971 and 1982.*  My quick takeaways from the HIE summary report:

• Higher deductibles did (modestly) reduce the number of doctor visits and hospital admissions per capita but that, for the vast majority of people, few visits didn’t result in an adverse effect on health.  The exception was the poorest and sickest 6% of the sample, who had better outcomes for 4 of the 30 conditions measured when they received free care.
• Per capita cost was in the range of $1000 to $1500 for all groups in the study – insured and uninsured (cost in 2005 dollars – estimate in 2005 dollars was obtained by inflating 1982 values by the CPI).  The highest cost was associated with free care and lowest cost was associated with highest co-pay (95%).

The per capita cost from the HIE report gets me thinking again about, Where the heck does the money go?  If I extrapolate the estimated 2005 cost to 2012 it still seems like premiums are >2x what they should be.

4.  I have a difficult time viewing this a purely economic problem, i.e., looking at it simply as a matter of having to cut X% from a budget is a failure to see the forest for the trees.  If someone needs care then they need care.   If you are going to cut X% out of the budget then some people aren’t going to get treatment or some health care worker is going have their salary and/or benefits reduced, etc., etc.  – somebody is going to get pinched and the human side of who gets pinched matters.

5.  Re Brad’s post, I was not aware that we’ve been importing doctors and nurses from Costa Rica.  I find that more than a little disturbing:  a) Costa Ricans can’t be too happy to lose them and b) I’m not a fan of importing labor to drive labor costs down.   There’s no shortage of smart, capable, and motivated US residents who could be trained for those jobs.  Put them to work!

* That’s right, it concluded 30 years ago, so perhaps it’s appropriate to take the conclusions with a grain of salt.  The US and medicine have changed considerably since 1982.