Checking Up On Health

Health Policy Briefs

Compiled by Benita M. Dodd

Benita M. Dodd
Vice President, Georgia Public Policy Foundation

“Can markets work in health care?” is the headline of a Forbes magazine article reminding us of a 1974 study that demonstrated how ownership promotes accountability and personal responsibility. RAND researchers randomly assigned more than 7,000 individuals into various types of health insurance policies: ones with completely free care (no cost sharing), ones with a modest deductible (e.g., $200) and 25 percent cost-sharing, and ones with the equivalent of high-deductible policies. All the cost-sharing policies had a maximum upper limit on out-of-pocket spending, meaning once a family spent 10 percent of income on health care, the policy paid 100 percent of the year’s remaining medical bills.

The study found that average health spending for individuals receiving free medical care was 32 percent higher than for those who had to pay a quarter of the bill out of pocket. Some of this extra care admittedly was valuable, but fully 93 percent of that spending difference came in the form of “waste” rather than added value to the patient. And for the average patient, there was no measureable difference in health status between the two groups. “In short, we have substantial solid scientific evidence that markets can work in medicine,” writes Christopher Conover of the American Enterprise Institute in Forbes. “Instead of supplanting the judgment of consumers by requiring them to buy the medical equivalent of Hondas instead of Yugos, we should empower patients and harness the extraordinary ability of Americans to find good value for their money. The prescription for our health care reform ills is economic freedom.”

What does the boss think? Nearly two-thirds of employers see the Patient Protection and Affordable Care Act as a step in the wrong direction, according to the 2012 Deloitte Survey of U.S. EmployersAnd when considering health care related strategies to reduce the deficit, employers support reforms in medical liability, Medicare and Medicaid, and repeal/delay of the federal law known as ObamaCare. Across-the-board cuts in government spending are considered a higher priority than changes to the health care system. Most employers say their company is “not well prepared” to implement the law’s 2014 provisions. They believe the optimal strategy to manage health care costs is increased cost-sharing with employees and see. Interestingly, across-the-board cuts in government spending are considered a higher priority than changes to the health care system.

Medicare wars more a skirmish: There’s not much difference in Medicare spending between the Ryan budget and the Obama budget, even when the estimates of the president’s budget are made by his own Office of Management and Budget and the Ryan plan is projected by Paul Ryan himself, writes John Goodman in his Health Alert blog. He maintains that the Ryan approach at least has the possibility of making the slower growth of Medicare less painful by turning to market-based reforms rather than suppressing provider fees. Goodman’s own proposals to curtail Medicare spending include allowing seniors to pay the market price for their services at walk-in clinics and other retail health care outlets and allowing seniors to manage more of their own health care dollars through Health Savings Accounts.

Looking more like Medicaid: Under the federal health care law, participating insurers won’t be able to increase cost sharing or drop mandatory benefits quickly and deeply enough to escape the growing squeeze between rising health care costs and the mounting federal budget deficits, according to the American Enterprise Institute. “There’s good reason to believe that in short order, the health plans sold in Obamacare’s heavily regulated, state-based insurance exchanges will degrade into something akin to today’s Medicaid managed care plans, the article notes. “If a lot of consumers who presently get their health coverage at work are dumped into these state exchanges (as many independent analysts predict), then tens of millions of Americans could find that they’re worse off under the new law and that their health benefits have been substantially devalued.” Source:

Quote of Note:  “Was the government to prescribe to us our medicine and diet, our bodies would be in such keeping as our souls are now. Thus in France the emetic was once forbidden as a medicine, and the potatoe as an article of food.” – Thomas Jefferson

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