Yes, The Health Bill Really Lacks Serious Cost Controls

I was debating whether I should do one final piece to show that the health care bill about to be signed into law lacks serious cost control. Fortunately, Ezra Klein, who is a big supporter of the bill, accidentally did my job for me.

In his piece "The five most promising cost controls in the health-care bill," Klein tries to make the case that the bill does contain a lot of serious cost control. The problem is, three of his five ideas just don't hold up. His five promising cost controls are:

(1) Create a competitive insurance market:

The idea of lousily regulated health insurance exchanges is not new. The Federal Employee Health Benefit plan (FEHB) has been a health insurance exchange for several decades now. With roughly 8 million users, it is bigger than any state exchange will be. Yet, the evidence is that health care costs on the FEHB grow at at effectively the same rate as the rest of the employer market. Even Klein himself has admitted this. Exchanges will probably smooth out the fluctuations and imbalances in the individual market and should reduce some amount of administrative overhead in a small part of the health insurance market, but the evidence they will systematically bring down cost is sorely lacking.
(2) The Medicare Commission:

Despite the huge carve-outs to protect most of the more costly aspects of the Medicare program from changes by the commission, this idea could potentially to do some cost control.
(3) A tax on "Cadillac plans":

The first problem is that this tax does not kick in for eight years (2018). Given its unpopularity and poor design, it is hard to imagine it survives as is. Also, the claims that taxing benefits will really control costs seem dubious at best. I agree with the assessment of the Center for Medicare and Medicaid Services, which concluded the excise tax's ability to bring down National Health Expenditures would be very minimal.
(4) Medicare "bundling" programs:

This is a good idea. Paying for quality and not quantity is a smart move. Ideally, this will help bring down cost.
(5) Changing the politics of reform:

Now this is just silly. Changing the politics of reform is not “in the bill.”

Klein is basically arguing that the bill's promised affordability subsidies and individual mandate are unsustainable because the bill lacks sufficient cost control (which is true). But, he argues, now that the government has made promises it can't keep, it will eventual need to deal with real cost control, or cut services.

I do hope the solution is real cost control reform, but I fear Republicans will kill the program with a thousand cuts. Only a small group of Americans will use the exchanges and qualify for tax credits. I can easily picture a scenario where Republicans slowly reduce tax credits, scale back insurance actuarial values, add co-pays for preventive services, reduce what must be covered in the minimum package, etc., instead of taking on the insurance companies, drug makers, and providers to actually bring down costs.

So, the bill does really lack serious cost control.

In Klein's attempt to defend the bill, he points to five cost controls. Only two seem to show some promise. Two others are dubious, with little evidence to back up the belief that they will bring down prices and one "cost control" is not even in the bill at all, just a vague hope for a better tomorrow. If this is really the best defense of the cost controls you can get from a strong supporter of the bill, my case about how the bill really lacks true cost control reform has basically already been made.

Now that the bill has passed, I would hope people can focus on its many failings more openly. Almost all the real cost controls were dealt away by President Obama to big health industry lobbies last spring. As a country, we will actually need to deal with health care cost control if we hope to stay competitive in the international marketplace. Pretending that this bill will accomplish way more than it really will is not a good path to much needed further action.

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