Posts Tagged ‘Dick Durbin’
February 26th, 2010 at 2:29 am
Breaking the Iron Triangle of Health Care
Posted by Print

During today’s health care summit at Blair House, Wyoming Republican Senator John Barrasso (an orthopedic surgeon by trade) dropped the jaws of Democrats in attendance by declaring that individuals who only have “catastrophic care” health insurance (which Democrats had been spent all day citing as a moral failure) often make better medical decisions than people with more comprehensive plans. Barasso’s reason was simple — these consumers actually have to consider the cost of their treatments.

Though President Obama and Congressman Henry Waxman were quick to ridicule Barasso, he got to a truth that is at the very root of meaningful health care reform: the system can’t work as long as consumers are being insulated from costs.

Two economic maxims suffice to make the point: (1) “If you’re paying, I’ll have the steak” — There is no incentive to keep your spending under control when someone else is footing the bill (2) “No one washes a rental car” — Ownership is the best motivation for vigilance, because if something goes wrong, you’ll be the one eating the costs. Having someone else shield you from health care expenditures only weakens your incentive to be vigilant in regard to your own well-being

Earlier in the day’s proceedings, Obama and Democratic Senator Dick Durbin of Illinois rained on the tort reform parade by claiming that the $5 billion a year that could be saved by reforming the malpractice system would be a drop in the $2 trillion health care bucket (as an aside, I’ve always thought this is a bizarre rationale — how can anyone expect to realize large savings if they ignore all the incremental savings that will get them there?). Yet if tort reform was too picayune, why are Democrats ignoring Barrasso’s point, which got to the heart of what drives health care costs through the roof?

The problem with modern health care is that is built on a triangular model. In most cases, one person pays for the care (an employer), one person consumes the care (the patient) and one person provides the care (the doctor). This is a recipe for unhappiness and inflation, because the person who consumes is unaccountable to the person that pays, and the person that provides is unaccountable to the person they provide for (Harvard’s Regina Herzlinger has been invaluable on this point).

The Republican talking point is that health care needs to be reformed in small, incremental chunks. That may be a sound legislative strategy, but it’s not true as a matter of policy. The system needs to be fundamentally reformed and placed on a consumer-driven basis (and yes, conservatives, you can learn from Europe — Switzerland has a pretty good model. If you’re really in the mood for right-wing apostasy take a gander at Whole Foods’ ideas too). Subsidies are always going to be necessary for the indigent, but more far-reaching government control is not the answer. Comprehensive reform that makes health care market-driven is.