Tag Archives: health care incentives

Health Alerts

Keeping Score

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Why is it that Washington is spending so many hours over so many months — on top of two decades of prior conversation, analysis and debate — and is still failing to come up with a reasonable way to reform the health care system? Today I will slice through the Gordian Knot and give you a simple way to keep score.

There are four basic questions to be asked of any health care system. If you answer these questions the right way, the path to reform is rather easy and straightforward. But if you answer even one question the wrong way, you will get caught up in a cycle of complexity — with fix upon fix, each trying to patch up the problems created by the previous fix.

Hint: Right answers are the ones that give people socially good incentives. Those are incentives to meet your own needs without imposing external costs on others. Wrong answers are the ones that give people socially bad incentives. These are perverse incentives to impose external costs on others in the process of pursuing your own interests.

httpv://www.youtube.com/watch?v=An1-ntyBcz8

“1-2-3…that’s how elementary it’s going to be”

Continue reading Keeping Score →

Health Insurance

Which is Worse? Dumping the Sick? Or Denying Them Care?

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A New York Times editorial complains that insurance companies cancelled 20,000 insurance policies over a five-year period – usually because of withholding information about pre-existing conditions. But at least patients got the care.

The Times' solution: Prevent insurers from dropping anybody for any reason, but leave them with even stronger incentives to underprovide care.

Health Alerts

Chronic Care

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By some estimates, more than half of US health care spending is for patients with chronic conditions. As I have previously reported, this money is spent very wastefully. Care is often delivered in discrete, disjointed and disconnected ways. The most efficient form of therapy (drugs) is substantially underutilized. And many chronic patients are not receiving care at all.

Fundamentally, there are two ways to deal with chronic care. The current approach is a nonmarket approach, and it has the following 10 characteristics:

  • Completely suppressing the market for every facet of medical care and every type of health insurance — so that no one ever faces a real price for anything;
  • forcing health plans to take enrollees they don’t want at premiums well below the cost of their care;
  • forcing doctors to treat patients with complicated conditions for the same fees as easy-to-diagnose-and-treat patients;
  • paying doctors in a way that encourages uncoordinated and unintegrated care;
  • denying providers the opportunity to repackage and reprice their services in ways that would lower cost and raise quality;

Petition Signers: 170,000 and rising Continue reading Chronic Care →

Health Insurance

Another View on Safeway

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Wall Street Journal readers might have noticed two different takes on Safeway CEO Steve Burd's health-reform agenda this morning. Kim Strassel praised his success at keeping health costs flat for four years, through an incentive-based plan that rewards employees for quitting smoking and other healthy changes, and characterized him as an opponent of government-run health care. Over on the letters page, yours truly and others criticized Mr. Burd's involvement with the political class, especially his proposal that the government should "cover all Americans" with a plan like Safeway's. Continue reading Another View on Safeway →

Health Alerts

Why Health Reform is Bound to Fail

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Why is Washington having so much trouble reforming health care?

Why, if they do pass a major overhaul, are the problems of cost, quality and access almost certain to get worse?

Answer: Because they don't understand health care. By that I mean, almost no one in Congress understands health care as a complex system. When they campaign, most politicians claim that health care problems could be solved with a few simple reforms. Now that it's time to legislate, they are discovering that health care is very, very complicated. In fact, there is no solution that even comes close to being simple or easy.

As Nobel Laureate Frederick Hayek taught us, a complex system is a structure that is so complicated, that no one person can even begin to grasp it in its entirety. The best each of us can hope for is to master the small part of it we interact with.

The economy, for example, is a complex system. To allow us to think about it — if only imperfectly — economists have developed a highly simplified model over a period of 200 years. In fact, the only reliable model that exists to understand complex social systems is the economic model. Yet we have completely suppressed normal market forces in virtually every aspect of health care. So what we are left with is almost certainly the most complicated market of all and no reliable model with which to understand it. Continue reading Why Health Reform is Bound to Fail →

Health Alerts

Taxing Health Insurance Benefits

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After spending hundreds of millions of dollars in the last campaign election accusing John McCain of wanting to "tax the health insurance benefits" of ordinary Americans, President Obama now says he is open to the very same idea and it seems likely that the Congressional Democrats will themselves opt to tax health insurance benefits, as part of overall health reform.

Is this a complete flip flop? Yes. And other than Kimberley Strassel's Wall Street Journal editorial last Friday, the media is giving the President a free pass. But can the Democrats claim that Republicans have endorsed the same idea? If they are intellectually honest, I think not.

Continue reading Taxing Health Insurance Benefits →

Medicare

Incentives Matter

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The following is from AHIP’s HI-Wire Connection newsletter:

Co-pay incentives drive behavior change, reduce cost trends, and accelerate positive outcomes for Medicare Advantage (Part D) beneficiaries, according to the Center for Health Value Innovation:

The paper contends that, contrary to recently recommended policy changes by the Centers for Medicare and Medicaid Services that exclude incentives through copay or co-insurance for chronically ill beneficiaries and high-value medications that target chronic conditions, the effectiveness of such incentives in driving business-based results is documented: At Caterpillar, for example, generic statins for cholesterol management were moved to a $0 co-pay; brand-name statins, to $35 per month or no benefit paid, depending on the dose. The plan, which covers 90,000 people, saw increased medication compliance, contributing to a $750,000 per month savings to the company and $175,000 savings per month to employees.