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Controlling Healthcare Costs The American Way: Not Doing It
...Now, the empirical part: everyone asking this question is looking longingly abroad while ignoring the evidence much closer to home. Exhibit A: we've got a single payer system, called Medicare. It negotiates huge cost discounts with providers. It has low administrative costs. It has a gigantic apparatus to evaluate reimbursements for various treatments. It has . . . a faster rate of per-capita cost growth than the rest of the health care system, according to a CBO report issued by one Peter Orszag.

Anything you could do to a putative new system, you could do to Medicare. And the reason we haven't is not that we just thought of comparative effectiveness research, healthcare IT, or strong-arming provider payments last week. These ideas have all been kicking around for a long time, and in the case of the provider payments, have already been tried more than once. Providers learn to game the new payment rules, and if they don't, they get Congress to undo them.

But maybe the new system will be different. So let's look at the closest model we have for this system in the United States: the state of Massachusetts. Massachusetts has all the goodies in the Baucus bill: subsidies, guaranteed issue, community rating, an individual mandate, and employer penalties. Indeed, the Massachusetts program is probably to the left of where we're going to end up, on things like empowering the exchanges to negotiate with insurance companies and the size of the penalties for failing to procure insurance, two measures which are supposed to be critical for holding costs down.

Instead, costs have exploded. ...

...So I'll turn it around on reformers: why do you think that we can control costs, given that we couldn't at the state level? Massachusetts is a very liberal state, a very rich state, and it started out with a relatively low proportion of its citizenry uninsured. Proponents of reform often say it has to be done at a national level because states can't borrow money in downturns, but this doesn't explain why the spending side is headed through the roof. Why are you gazing past the cost control problems at home towards people who don't even speak the same language we do, much less share a political culture?

It's no good saying that well, we should try to be more like the Netherlands--you can't build a system on the assumption that you will, suddenly and for no apparent reason, be able to import someone else's political culture. Progressives are watching the whole health care legislative process with utter dismay as it produces a monster of a bill that not even its mother could love--and trying to love it anyway, on the grounds that it's a start. But this ridiculous hodgepodge, this hypertrophied Rube Goldberg apparatus, is not some startling aberration of the political process, induced by some Republican dark magic. This is the kind of thing the American political system produces. This is why all of our programs have a substantial element of the inexplicable and bizarre.