Never-Ending Health Care Crisis, Part 2: Struggling to Pay for Stuff That’s Worth It—and a Possible Reprieve

Ross Douthat predicted that we are in for a never-ending health care crisis. He’s right, partly because health care is paid for by health insurance, which means spending other people’s money, as I said in Part 1.

But another factor drives the endless health care cost crisis even more: ever new and better medical technology—and the ever-increasing amounts we must find to pay for it. Those who follow health care policy (like Douthat) understand this. But to help inoculate the public against health care policy snake oil salesmen, everyone needs to understand it. To make things more complicated, but possibly a bit better, the US might, just might, get reprieve from the endless cost-growth.

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Single Payer Wouldn’t Be Simple Either: A Fractal Story

A two-page bill could have extended Medicare and provided universal coverage,” writes Franklin Foer in The New Republic, contrasting Progressives’ preferred single-payer system with modern liberals’ 20,202 page Obamacare legislation. Unfortunately, it’s not true.

Here is one of a zillion reasons why. Say that Grandma Mildred goes to the hospital with pneumonia. Medicare will pay the hospital based on her Diagnostic Related Group (DRG): one fixed payment for Grandma’s stay based on her diagnosis of pneumonia, no matter how long or short her stay, no matter how many tests she gets. This is so the hospital won’t give Grandma an extra X-ray to collect more taxpayer money.

Okay. So why not just extend that payment system to the under-65s? The problem is figuring out how much the DRG payment should be for them. Right now, MedPAC figures out how much to pay for each DRG, using cost and care data for Medicare (over-65 or disabled) patients they have been collecting for years. They would need the same data (and much analysis) for the under-65s for the expansion. And we would need to decide whether DRG payments vary by age and if so, how.  Continue reading