Wednesday, August 23, 2006

The GOP's Piecemeal Approach to Health Care Reform

President Bush signed an executive order yesterday mandating that federal agencies do more to keep beneficiaries apprised of the cost and quality of their health care.

Here's how the Washington Post describes it: "The executive order requires four federal agencies that oversee large health-care programs to gather information about the quality and price of care, and to share that information with one another and with program beneficiaries."

Fair enough. This sounds like a good order.

But then we get to this part of the article: "During a roundtable with medical and business executives, Bush touted the executive order as well as other initiatives that he believes could harness market forces to slow the skyrocketing cost of medical care."

The "other initiatives" are Health Savings Accounts and what's called Association Health Plans (AHPs), which allow small businesses to poll their resources across state lines to purchase health care.

I covered the limited promise of HSAs last week, so I'll touch on AHPs briefly now.

AHPs sound good on paper, but the trouble with them is that they geographically disburse payers in such a way that actually reduces their bargaining power rather than increases it, which defeats a primary purpose of health care pools.

Plus, AHPs would encourage the selection of healthier populations to get better premium rates, thus leaving the less healthy populations to toil alone in the traditional health care market that would subsequently see an increase in premium costs to cover the risk associated with insuring individuals who tend to require greater medical attention.

Even the nonpartisan National Small Business Association opposes the GOP-approved AHPs:


Despite [the] good intentions, we are concerned that AHPs are not only a non-answer to the real issues driving cost, but will exacerbate the problems small businesses face. The primary focus and cost savings of AHPs is through circumventing state laws and rating rules. AHPs threaten to greatly worsen the market segmentation and risk-aversion that currently characterize the small group health insurance market, which are at the root of the health care crisis uniquely faced by smaller firms. AHPs might be good for small business associations (like NSBA) who want to run them, but NSBA believes that they will not be good for the small business community at-large, whose interests we are bound to represent.


The AHP bill pushed by the White House and the Republican leadership is also opposed by over 1300 local and national organizations, including the National Governors Association, the Republican Governors Association, the Democratic Governors Association, 41 state AGs, the National Small Business United, and many others.

More importantly, the idea that piecemeal initiatives like AHPs, HSAs, CDHPs, and medical malpractice caps are going to solve the health care crisis in the US is ludicrous -- it's also all the GOP has to offer on the issue.

And this is where we get to the heart of what's wrong with Bush's order for price transparency.

There is nothing inherently troublesome with the order, but the broad promise Bush makes that it will somehow contribute to a significant drop in the cost of healthcare is a problem.

First, price transparency does nothing to address the massive administrative costs that are associated with the US health care system, which are in many ways the root cause of why our health care costs so much more than the health care in other industrialized countries. Nearly one-third of the total cost for US health care goes to administration, while the number is half that in nations like France, the UK, and Canada that offer universal care.

Second, as I pointed out last week, price is a moving target when it comes to health care. Due to the fragmented nature of the health care system, bills for a single procedure can come from a variety of places: hospitals, doctors, labs, etc. Plus, since every patient is different, it's nearly impossible to predict the exact cost of a procedure prior to that procedure taking place. Unexpected complications can take place that require additional or different procedures than the one that's initially planned. Take, for instance, a pregnant woman who goes into labor. For most women, the initial plan is to have a vaginal birth, but sometimes a cesarean section becomes necessary, which will greatly increase the cost of the delivery. And there are many other factors along the way that are even less common and, therefore, can't be predicted in an up-front price.

The bottom line is that the US health care system requires comprehensive reform, not piecemeal initiatives.

And the majority of Americans recognize this. According to a recent Commonwealth Fund survey, 75 percent of respondents think the US health care system needs to be fundamentally rebuilt, while only 20 percent think minor changes to the system will suffice.

Why are the people running this country in that 20 percent?


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