David Goldhill, consider our dental dystopia

David Goldhill, long an advocate of shunting all but catastrophic health care costs onto consumers (pairing super-catastrophic insurance with mandatory HSAs) offers, I must admit, a compellingly negative view of what's likely to become of cost controls embedded in the ACA or favored by the health care experts I like to read. It's a kind of mirror image of Atul Gawande's thousand flowers vision:

Through private insurance, Medicare and Medicaid, our health system relies on centralized cost control and clever adjustments to payment formulas to try to tame the beast. Traditional health experts may repackage their ideas, but they are never discouraged by past failure. So the new Accountable Care Organizations are a reinvention of H.M.O.’s. The Independent Payment Advisory Board is the new Medicare Payment Advisory Commission, or MedPAC. Bundled payments are the new Prospective Payment System.

We often see some early benefit from the introduction of new ideas, but over time such initiatives are always subjugated by our system’s nefarious economic incentives. Implement cost control reforms and watch providers circumvent new rules and guidelines. Reduce reimbursement rates for procedures, and witness providers expand the definition of required services. Convert fee-for-service reimbursements into bundled payments, and soon more severe diagnoses are given. Attempt to use government buying power, and see providers turn to lobbyists to keep prices up. We are approaching a half-century of fighting this losing battle.

It's true that power industries and interest groups are very successful at gaming new regulations. It's also true that today's reforms bear some resemblance to prior efforts.

But it's also true that new regulatory regimes are sometimes effective, if only for a generation and if only with constant tinkering. And that reformers learn from experience. ACOs are not HMOs; they are meant to pilot new pay-for-performance experiments. And IPAB, unlike MedPAC, has teeth  (if Republicans don't manage to sabotage it effectively). Also, for whatever reason (or rather cluster of reasons), the rate of healthcare cost growth is slowing -- though admittedly, the slowing seems to have begun before the latest round of reform and may prove temporary, like the slowing that occurred during the Clinton years. But anticipation of full ACA implementation is probably contributing.

Committed to patient-driven cost control, Goldhill also pooh-poohs the likely effect of instituting single payer, and here he indulges in some serious sleight-of-hand:

Some believe the only hope for cost control is to adopt a single-payer system as used in several other countries, even though the increasingly high costs of many of these systems look good only when compared with our unique disaster. 

Whatever your views of the effectiveness of these approaches, in our exquisitely responsive political system, government intervention in health care has often allowed for giveaways to powerful industry interests. Inserted in the recent bill to delay the fiscal cliff was, for instance, a provision mandating the delay of scheduled reductions in the price of a dialysis drug. (Medicare has financed almost all dialysis treatment for 40 years, at extraordinary expense and questionable safety, a cautionary tale for how single payer would work in our system.) Those who think single payer will establish real discipline in the United States haven’t been to a political fund-raiser or heard of the Iowa caucuses. They don’t understand how special interests already distort government reimbursement policies. 

Granted that single payer has not freed countries that implement it from serious healthcare challenges, they are working now from a baseline that, if it could be magically transferred to the U.S., would solve all our budgetary problems.  In fact, virtually all countries that provide universal healthcare -- that is, all wealthy countries except the U.S. -- spend half to two-thirds per capita what the U.S. spends. The common denominator is government control over pricing and coverage rules, whether via single payer as in Canada, government-run healthcare services as in the U.K., or payments filtered through private insurers as in France, Germany and Japan. It's our fragmented payment system that increases providers' leverage (while raising their administrative costs, partially justifying their higher prices), enabling them to charge about twice as much per procedure as is paid in, for example, Canada.

Goldhill's preferred solution -- universal catastrophic coverage, consumers paying the rest through HSA savings or out of pocket -- introduces perverse incentives of its own.  I addressed these at length in response to a more detailed layout of his plan, in the Atlantic in 2009. The post is here. Here's the gist:

Goldhill envisions a system in which we would each pay modestly for megacatastrophic insurance (covering expenses over, say, $50,000), make mandatory contributions to an HSA for major health care expenses, and pay smaller expenses out of pocket. The government could pay for the poor's catastrophic premiums and HSA contributions at relatively modest cost - less than that of Medicaid. Charity care would "go away." Doctors, hospitals, and specialty care facilities unleashed to compete with hospitals would be accountable to each of us for outcomes and cost.

What's wrong with this picture? I've always assumed that, faced with major surgery, it would be brutal to be forced to choose among competing surgeons based on cost and outcomes data. That's not necessarily so, if transparent data were to become the norm. Nonetheless, I think we'd all be faced with untenable cost-benefit calculations. A quadruple bypass or an operation for early stage prostate cancer may or may not be the best course of action for different patients. Should the prospect of spending $10k or $40k out of pocket tip the balance? Should such decisions be easier for the wealthy than for the middle class? (The poor would presumably be subsidized more heavily.) Not in what I would consider a civilized society.

As a counter-example to Goldhill's portrait of the laser surgery market, consider dental care, for which very few have insurance. The market is opaque and expensive, with no good outcomes data. There's nary a dentist who will not recommend more x-rays than you need. And in America today, poor teeth are a class marker; the poor generally simply don't get dental care.

Goldhill argues that bureaucratic cost controls can't control prices with the efficiency that a competitive market does. That may be true generally, but the proper comparison for health care is not with other consumer markets. The health care market is in some key ways naturally opaque. We'd be better off knowing what different surgeons charged for a prostate cancer operation. But we often can't know what we'll gain by getting the operation-- or what we'd lose (i.e., potentially, our life) if we abstained. Cost should figure into that equation -- if under certain circumstances "watchful waiting" or chemotherapy is as likely to have a good outcome as an operation. No provider should have an incentive for doing the more expensive thing. But cost shouldn't determine the individual's choice.