The placebo effect on health-care costs

It probably would surprise you to learn that health-care costs in this country may finally be coming under control. The truth is that from 2007 to 2010, per-capita health-care spending rose just 1.8 per cent annually. Since then, the annual increase has been a paltry 1.3 per cent. James Surowiecki SAYS one of the reasons for this trend is the simple fact that people are talking about health-care costs: The slowdown in spending is due in part to the recession and the tepid recovery—but not as much as you’d think. A recent paper by the Harvard economists David Cutler and Nikhil Sahni estimated that the recession explained scarcely more than a third of the spending slowdown. Oddly enough, the public debate over Obamacare has also played a role. Bob Kocher, who was a special assistant for health care in the White House in 2009 and 2010, did a report for Lawrence Summers on the past sixty years of health-care legislation, and found that when Congress seriously considered enacting health-care reform the rate of health-care spending often slowed for a year or two. Just talking about medical costs, it seems, limits medical costs. Kocher, a physician turned venture capitalist (and currently a guest scholar at the Brookings Institution), dubs this “the health-care-policy placebo effect.” As he told me, “When you’ve got politicians going around the country making speeches about how out-of-control health-care spending is killing the economy, health-care providers come to feel that it might make sense to be less aggressive in setting prices.” Both those effects are bound to be temporary. But there’s good reason to think that the moderation of health-care spending will persist, because, according to Jason Yeung, an investor at Morgan Stanley’s Growth Team, we’re beginning to see deeper structural changes in the health-care system. Historically, costs have been hard to contain because most of the players in the system have had no incentive to do so. Hospitals and doctors have typically been paid on a fee-for-service basis: the more things they do, the more money they get. Insured patients have paid only a small fraction of the cost of their care, and insurers have just passed costs along to their customers. Employers and the government, meanwhile, have been left to foot the bill. “What we’re moving toward instead is a world in which everybody in the system is sharing financial risk,” Yeung told me. “And therefore everybody has an incentive to control costs.” I(Snip) The Affordable Care Act is also helping hold down costs by changing incentives for hospitals and doctors. For instance, it penalizes hospitals when Medicare patients with certain conditions are readmitted within thirty days, on the assumption that this will encourage hospitals to offer better care initially, and to be diligent in following up. And the penalties are having an effect—since the A.C.A. passed, readmission rates have fallen. “Once hospitals feel that gut reaction of not getting paid when the patient has to be readmitted on the twenty-fifth day,” Yeung says, “that reverberates through the whole system.” What all these initiatives have in common is the idea that health-care providers are going to be paid based on the value they deliver, rather than on the services they perform. We’re in the early stages of that process: Kocher points out that fee-for-service likely...

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Sen. Mark Kirk’s stroke of awareness

In THIS PIECE by Daniel Gross about Republicans and health-care reform, there’s a telling passage regarding the junior U.S. senator from Illinois: In the old days, they used to say that a conservative is a liberal who has been mugged by reality. When it comes to health insurance, it seems a liberal is a conservative who has been mugged by an illness. After having a devastating stroke in 2012, Sen. Mark Kirk had an epiphany about the inadequacy of rehabilitation services for poor people. “My concern is what happens if you have a stroke and you’re not in the U.S. Senate, and you have no insurance and no income,” he told National Journal. “That’s the question I have been asking, and the reality is that if you’re on Illinois Medicaid and are a stroke survivor, you will get just five visits to the rehab...

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Right-wing Republicans seem to think of Romney as a dog that has to be housebroken

When an aide to Mitt Romney said something favorable the other day about health-care reform in Massachusetts, the Mittster’s principal achievement as governor of that state, right-wing pundits went ballistic. The message was clear: Let’s have no more talk about RomneyCare. Brian Beutler puts it THIS WAY: Those are the marching orders, and thus far they’ve controlled Romney’s campaign. Romney’s health care heresy was the biggest breach, and the right’s reaction was swift and demeaning — one compared it, in a widely approved tweet, to housebreaking a dog. The most recent manifestation is an all-hands-on-deck effort to make Romney pick Paul Ryan as his vice president. Choosing Ryan would heighten the substantive stakes of the election, but it would also put a watchdog on the ticket — one who would be disinclined to march along if Romney wandered away from the conservative agenda. “The clamor you are hearing for Paul Ryan for VP is not about helping the Romney candidacy,” wrote conservative writer, and former George W. Bush aide, David Frum. “It’s about controlling the Romney campaign—and ultimately the Romney presidency. It’s about forcing a platform on Romney, and then dictating the agenda for that presidency’s first year. The platform happens to be suicidal, and the agenda impossible, but that does not matter to the Ryan advocates. They take the old Tammany Hall point of view: ‘Better to lose an agenda than lose control of the party.’ In that sense, the Ryan proposal is a test of Romney’s leadership. If he accedes, it’s a big surrender of control—and a surrender to many of those who most opposed (and who inwardly continue to dislike) his nomination.”...

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Health care mandate defended by…well, guess who

In a speech at the conservative Heritage Foundation six and a half years ago, Massachusetts Gov. Mitt Romney sang the praises of a certain provision in a health care reform program he had introduced in his state. His audience, by all accounts, loved it. [youtube]http://www.youtube.com/watch?v=TTByvLtYIYA[/youtube]  

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Obama gets some help in explaining health-care mandate

Comparisons like the one in this video, where Barack Obama and Mitt Romney are basically reading from the same page, probably are highly annoying to partisan Republicans. Don’t you love it? [youtube]http://www.youtube.com/watch?v=CN0qIJgfAgk[/youtube]  

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