CBO Makes the Same Point I Have Been Making

One point I have been making for a long time on health care is that all the studies showing waste and unproductive spending in health care are irrelevant to government policy because at the end of the day, the Federal government does not know how to capture these savings.  The CBO says basically the same thing in a chart from a recent presentation.  The chart is titled "Reducing Growth in Federal Health Spending"

On the upside:

  • There is considerable agreement that a substantial share of current spending on health care contributes little if anything to people's health.
  • Providers and health analysts are making significant efforts to make the health system more efficient.

On the downside:

  • It is not clear what specific policies the federal government can adopt to generate fundamental changes in the health system. That is, it is not clear what specific policies would translate the potentialfor significant cost savings into reality.
  • Efforts to reduce costs increase the risk that people would not get some health care they need or would like to receive.

I am pretty confident from my experience with a high-deductible health care plan that the only way to start capturing savings is for individuals who recieve care to have the incentives and decision-making power to make cost-benefit tradeoffs in their own health care procurement.  This, however, is the absolute last thing this administration and Congress would ever allow, with the latest bill actually forcibly removing what small incentives that remained for individuals to make these tradeoffs.  All we are going to get are command and control care cuts  (based on the political power of the particular service or drug provider rather than medical efficacy) and price controls.

More at South Bend Seven


  1. RobTzu:

    I just had a mishap with my insurance. Quest diagnostic did some blood work on me for my yearly physical and billed my old insurance company, which obviously refused it. (How quest messed up is beyond me, I filled out their damn forms....) Anyway, I got a bill for $528. Called them, got them to bill my correct insurance, and the DISCOUNT was %428. The service cost a $100, but had I no insurance the cost would have been the full $428. Had I tried to negiotate the price down by paying cash I do not think I would have the testicular fortitude to aim for 20 cents on the dollar.
    Its amazing they give a discount for doing extra paperwork and getting the money months from now, instead of a discount for money up front with no extra paperwork!

  2. RobTzu:

    Egads, my proofreading skills suck.

  3. mesaeconoguy:

    at the end of the day, the Federal government does not know how to capture these savings.

    The federal government has zero incentives to capture any savings.

    They are a monopsonist employer. They are subject to negative oversight. They are, for all intent and purpose, the worst allocation of economic resources with no effective competitive check, resulting in maximum cost, with minimum benefit.

    It is time to obliterate this mistake.

  4. ilovebenefits:

    This is an excellent post. We have been trying to increase the cost share of employees at the point of service as opposed to increasing premiums/payroll deductions. When we have put in high deductible plans we have seen significant reductions in utilization and no discernable impact on health over the past 5 years. http://www.ilovebenefits.icbn1.com