Posted 7:17 AM by steve

It's not just liberals who have no clue when it comes to dealing with the so-called health care crisis, conservatives can be just as clueless.

For example, John Hawkins has a column in which he touts four ways of reducing health care costs. Unfortunately, his ideas will do nothing of the sort.

John confuses 'prices' paid by patients with the 'costs' incurred by doctors and hospitals in providing that care. He also mixes up the costs of 'health care' with the costs of 'health insurance'; as I've said many times, they are not one and the same.

Allowing people to buy health insurance from out of state insurers (his first suggestion) might result in lower health insurance costs for some people but does nothing to lower the costs of providing the health care those people will receive. My doctor will incur the same costs treating me regardless of whether the payment comes from an in-state or an out-of-state insurer. In fact, the costs incurred in treating a patient are the same regardless of whether the payment comes from an insurer, out of my pocket or from the government. The only thing that varies is how much of those costs the doctor receives in payments from whomever is writing the check.

An insurance company can offer lower rates only by doing one of three things: it can administratively more efficient (for example, if it figures out a way of needing fewer people to process claims), two, by accepting a lower profit margin, or, three, by paying out less in claims. The first does lead to less money being spent on health care, but chasing administrative savings has limited upside (there are only so much in efficiencies that can be wrung out of the claims process). Likewise with the second. There may be some insurance companies willing to work for less but there's a limit (zero profit), beyond which a company goes out of business. And the third option, paying less in claims, just shifts dollars from one pocket to another.

John also proposes fixing Medicare (a common recipe from both the right and left). John's complaint is that Medicare doesn't reimburse anywhere near the full costs of the treatment thus costing people outside Medicare more money. But while increasing the Medicare reimbursement rate might lead to lower costs for non-Medicare patients, it does nothing to lower the overall costs of medical care, it simply shifts the burden of paying for those services from one group to another.

John's on more solid ground with his call for tort reform. To the extent that so-called unnecessary tests are being performed, eliminating these would bring down the costs of medical care. However, medical malpractice does impose a cost on the affected patient and society as a whole; cutting back a patient's ability to be made whole doesn't reduce the costs of medical care, just as with John's other suggestions, it simply shifts the costs of medical screw ups from the doctor who screws up to the patient who has to bear the costs of those screw ups without reimbursement.

His final point, giving tax credits to individuals rather than businesses for buying health insurance would result in less money being spent on health care... but only in the short term. To the extent that individuals spent their 'own' money on health care, they would likely spend less... but at the cost of deferring basic care, choosing on the basis of price rather than quality and so on... all of which is going to come back to bite them in the form of a lot more money spent later fixing all of the things that weren't taken care of the first time around (think of the old FRAM oil filter commercials: 'you can pay me now or you can pay me later').

As I've said before, there are really two issues: how much money should be spent on health care and who pays for those costs? To the extent it is possible to spend less money for the same (or better) level of health care, great.... but John's suggestions don't get us there.

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