Controlling Health Care Costs

Ron Brownstein discussed health care in the LA Times today. He notes that Republican proposals are unlikely to do much to affect health care costs:

There's no silver bullet for controlling medical costs. The inability of even a massive consumer like GM, with its vast bargaining power, to hold down its bills belies the simplistic suggestions from Bush and conservative thinkers that transferring more of the cost to individuals will significantly reduce costs by making patients smarter consumers.

He has a more favorable view of John Kerry's health care proposals:

The best domestic policy idea that Sen. John F. Kerry (D-Mass.) produced in his 2004 presidential campaign directly addressed that problem. Kerry proposed that Washington assume 75% of the cost for any patient whose annual health expense reaches $50,000. One leading analyst estimated that change alone could reduce health insurance premiums by 10%.

Kerry plans to embody his proposal in legislation this year. Frist hasn't progressed as far toward a specific plan, but he has proposed a public-private partnership that could absorb more risk for the most expensive cases from individual insurers.

What else? Allowing Medicare to bargain directly for prescription drugs would establish benchmarks that could lower the massive pharmaceutical costs now inflating healthcare spending. (GM alone spends about $1.5 billion annually on prescriptions.) More creative efforts to encourage fitness would reduce the incidence of expensive illnesses, such as diabetes, linked to a widening (sorry) obesity problem.

Finally, covering more of the nearly 45 million uninsured Americans would shrink the huge bill for uncompensated care (recently estimated at $43 billion annually) that the insured pay through higher premiums.

Each of these steps would require more federal spending or intervention in the market. Big employers like GM contributed to their problems by allowing their ideological resistance to such activism to mute their support for innovative ideas like Kerry's. But Wagoner now talks urgently about the need for national action, and Washington should respond.

While Brownstein specifically gives Kerry credit for government reinsurance of catastrophic claims, other ideas Brownstein endorses were also part of Kerry's health care proposals, including allowing the government to negotiate drug prices under Medicare and covering more of the uninsured.