Cassidy: Legislation Is Missing Incentives to Control Costs
Pop quiz: What is the goal of health care reform?
(A) Expand access
(B) Lower costs
If you answered (A), odds are you’re a Democrat. If you answered (B), you’re probably a Republican. But if you reject that you have to choose, you’re on the right track.
Supporters of the president’s plan, which is essentially the bill that passed in the Senate, prize a Congressional Budget Office report showing that 31 million uninsured Americans gain access to coverage under his bill.
However, supporters of this proposal avoid discussing the CBO’s projection that it increases the cost of health insurance. They also avoid the Centers for Medicare and Medicaid Services report estimating “that total national health expenditures under this bill would increase by … $234 billion” over 10 years.
Likewise, Republicans highlight a CBO report showing that the House GOP bill will reduce insurance premiums by 10 percent. In turn, Democrats criticize the GOP plan because it extends coverage to fewer Americans than their bill.
Returning to the quiz: Which sentence makes sense?
(A) Health care is inaccessible because it is unaffordable.
(B) Health care is unaffordable because it is inaccessible.
Clearly (A), health care is inaccessible because it is unaffordable. The reverse is nonsensical.
Therein lies the problem with the president’s plan. It attempts to provide access without addressing cost.
When campaigning, Barack Obama pledged that his health care plan would “save a typical American family up to $2,500 every year on medical expenditures” and provide “quality, affordable and portable health coverage for all.”
As a physician who has treated uninsured patients at a public hospital for 20 years, I applaud the president’s goals. Unfortunately, as economists at the CBO and the CMS explain, his plan fails to achieve them.
The key to expanding access is lowering costs. The key to lowering costs is empowering patients.
Nobel Prize-winning economist Vernon Smith explains that the central problem with our health care system is, “The health-care provider, A, is in the position of recommending to the patient, B, what B should buy from A. A third party — the insurance company or the government — is paying A for it. This structure defines an incentive nightmare.”
Costs are spiraling out of control because the consumer has no power or incentive to control them. The closest most patients come to price is the $15 or $20 copay. When we leave the doctor’s office, we don’t know if we received $5 worth of health care or $500. This bargain is Smith’s “nightmare.” It hides and contributes to higher insurance premiums and medical inflation.
To correct this, health care reform must realign incentives to encourage value-conscious decisions. Congress can do this by expanding the use of health savings accounts and making health care pricing transparent.
An HSA is essentially a checking account filled with dedicated health care dollars, accessed via debit card or reimbursement. Instead of contributing to a traditional insurance plan, patients and employers contribute to the HSA, which is coupled with a high-deductible catastrophic policy. To ensure universal access, advanceable tax credits could be used to fund HSAs for those who cannot afford them.
HSAs belong to the patient, who rolls over unspent funds year after year. This incentivizes wise decisions. Because the patient pays her physician directly from the HSA, this model corrects the incentive nightmare.
Since their inception in 2003, HSAs have demonstrated remarkable success at lowering costs and expanding access to quality care. The Kaiser Family Foundation found that HSAs are 30 percent cheaper than traditional insurance policies with similar benefits, that 27 percent of those currently covered by HSAs were previously uninsured and that those with HSAs use preventive services as frequently as those with traditional insurance policies.
Thirty percent cheaper. Twenty-seven percent previously uninsured. Access to preventive services. Lowering costs expands access to quality care.
Additionally, to unleash the full cost-controlling power of HSAs, Congress should eliminate barriers to transparency in health care pricing. This would spur competition by subjecting the health care industry to the market forces that decrease costs and increase quality in every other sector of the economy.
Patients, armed with HSAs and empowered by medical transparency, will drive down costs by demanding higher quality care for less. As costs fall, health care becomes more accessible.
Americans have rejected health care proposals advanced in the House and Senate because they will not lower costs. It is my experience working in a public hospital that when costs are out of control, access to quality care suffers. This is also the experience of Britain’s National Health Service and Health Canada.
Unless costs are lowered, it is impossible to provide universal access to quality care without bankrupting the country. To lower costs, empower patients.
Rep. Bill Cassidy (R-La.) is a gastroenterologist.