Wednesday, February 9, 2011

Savings Reduces Someones Income

Austin Frakt's latest Kaiser Health News column is here making the case that insurance reforms could achieve some savings, but will not be enough to create a sustainable health system. He notes that for the past half Century, the overall medical loss ratio (percent of premiums spent on care) has been at least 85%, so the codification of this standard is not going to have massive impacts on costs. Similarly, counter proposals that claim to increase competition for insurance won't revolutionize costs either unless there is also a reduction in the 'loss' portion of insurance, which means amount paid (providers get less income) times amount of care received (patients get less care).

Austin notes that payments to providers have got to be part of the solution, which reminds me of the way I ended my July 31, 2009 column in the News and Observer while the legislation that became the ACA was still being put together:

"We need to expect more value for money in health care while reducing costs. It will not be easy, as any savings realized will be a reduction in someone's income. For now, everyone is saying reform is needed, but no one has had to be opposed yet. As legislation moves toward a final House, Senate and ultimately conference committee vote, there is only one certainty. If opposition to a consensus bill does not become ferocious, it can mean only that the proposal does not seriously address health spending growth."

Slowing costs appreciably will take paying providers less and reducing the amount of care that people receive. The first will be hard, and there are limits to how much of that you can do. The second will be very hard, but should be lead by asking the questions 'does it extend life?' and 'does it improve quality of life?' and how much does it cost? And then providing evidence based answers, and figuring out how to provide this information to patients and providers in a prospective manner. That will be technically hard. In our current political climate, asking these questions reasonably seems culturally impossible.

Any replace option to the ACA has to work in the exact same climate.

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