Code Red: Two Economists Examine the U.S. Healthcare System

March 23, 2010

Five Questions about the New Law

Filed under: Uncategorized — David Dranove and Craig Garthwaite (from Oct 11, 2013) @ 9:11 am

1) Isn’t rationing explicit? The new Independent Medicare Advisory Council is charged with lowering the rate of growth of Medicare spending. IMAC cannot reorganize how care is delivered to improve efficiency. Its only tools therefore are price reductions and quantity restrictions. Both imply rationing. I bet that many of my friends will serve on IMAC but I don’t see how they can do their job without rationing care. Rationing is not necessarily evil – let’s hope that my friends can work magic and find ways to cut unnecessary tests and procedures and little else. But let’s be upfront about it.

2) What happens to Medicaid? Medicaid is going to expand dramatically. Congress says it will give money to the states to cover the costs. States are already underfunding Medicaid with providers like Walgreens and many doctors abandoning the program. I don’t trust my legislators to take the money from Congress and use it to keep Medicaid going. There are too many others standing in the front of the Illinois legislative trough.

3) How can insurers, providers, and drug makers all benefit (as the government alleges) and medical spending go down? Enough said.

4) What plans will qualify for the exchange? Will high deductible plans have a role? Tight HMOs? If not, how the heck can we expect costs to fall?

5) How will we know if health reform is working? We can measure the number of uninsured. But what other benchmarks has Congress established? If health costs increase by 10% annually, will that be a failure or success? It seems that Republicans and Democrats will establish their own criteria after the fact. As always in politics, both parties will claim they were right and the voters will have to fall back on ideology.

(Thanks to Craig Garthwaite for most of this.)

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