Countervailing power and health care finance: an insider’s view

The ideal, in a few words: “tightly regulated, mandatory, health plan schemes that balance power among consumers, suppliers, plans, and government.”

A friend in the healthcare industry loved Harold Pollack’s discussion of the political economy of health care finance. The problem is to create a locus of bargaining power that can carry out effective cost control in the face of extremely strong provider interests without enabling cost-control-by-letting-sick-people-die.

He writes:

Countervailing power is crucial and doesn’t get enough attention. Today it seems to me we have the following distribution of power among key players:

* Consumers (currently mostly left out and not structured properly from an incentive perspective);·

* Commercial payers/ employers/ unions (very modest because their role, too, is structured so awkwardly given their fundamental missions);

* Health plans/insurers (currently modest at best in terms of net positive meaningful impact, but I believe poised for another round of major contribution);

*  Suppliers (enormous); and

*Government (even now fairly enormous but generally poorly wielded) – will determine our success or failure over time.

I think many of us share certain conservative notions conceptually re: the desirability of finding better ways and incentives to give consumers more information and power, an issue even more critical for vulnerable individuals and populations. Yet moving that theory in to practice is very difficult. In addition, the fact that consumers in the US continue to have an unfortunate worshipper:deity relationship with providers makes it an even more difficult nut to crack. Most people actually believe, for example, that only they and their doctor know what’s best for them, which is abject b******* in many if not most cases. They also never think to wonder whether a functional market for a public-like good would pay the ophthalmologist $900k.

Which does leave us with some combination of government and other players needing to become much stronger in the bargaining scheme. The advantage of the “all Medicare fee-for-service all the time” approach would be the concentration of that power with government, and the removal of employers from their fundamentally ill-informed and unproductive roles as payers. The disadvantages would be that a) we would still have a volume-based system, b) we would now officially remove consumers from having any real power (voting with your feet doesn’t count if you don’t have information and there is a supply shortage, which there is of practitioners), and c) we still have a political structure in which rent-seekers will be richly rewarded to the detriment of others. Thus, this approach would likely fail as well. In addition, it would not take advantage of the major intellectual, clinical, and system assets that some of the bad ole health plans do have, assets which, properly aligned with other system incentives, can make real differences in both quality and cost.

So what’s the answer? Recognizing that a little knowledge is a dangerous thing, the solutions in, e.g,. Switzerland, appear to have much to recommend them: tightly regulated, mandatory, health plan schemes that balance power among consumers, suppliers, plans, and government.

The question then remains, of course, how one gets there in a world where supplier power is currently so strong.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

5 thoughts on “Countervailing power and health care finance: an insider’s view”

  1. It is my impression that people with Medicare can choose their doctor, so how is that not voting with their feet? The people I know on Medicare – admittedly, not that many – never complain about getting refused care by a doctor. Though I am in a more urban area. Is this a problem in rural areas?

    I think an opthamologist deserves a $1M more than most bankers probably do, if we’re going to “go there.” If you’re looking for a functional marketplace before we get universal care, then that’s a really great way to argue against ever having universal care. Conservative, indeed.

  2. I’m wondering how much money preventing a case of blindness saves the government.

  3. NCG: Sure, customers can switch health care providers, but if they don’t have a sufficient background to actually be able to discern which providers provide higher quality care, then it doesn’t do any good in terms of improving health care. Voting with your feet is only valuable in a situation where your walking vote is based upon knowledge most people don’t have about medical decisions.

  4. 1. There is no shortage of Docs in my area (Los Angles). It is quite easy to get in to see a Doc on short notice around here. The main concern when you call for an appointment appears to be your insurance.

    2. I am a recent arrival to Medicare (Advantage Plan). By the way, I like it much, much better than the Blue Shield plan I had before. and I was recently refused care by a Medicare accepting Doc who (incorrectly) refused to take my Medicare because he didn’t like my Advantage plan,–had a big sign on his door about his terrible mistreatment by Blue Cross–even though my plan covers visits to non-plan Docs who get paid exactly what regular Medicare would pay them for the same services. Interestingly, it appears that neither Medicare nor Blue Shield have any effective way to deal with this based on the effect of my complaints to date. While I readily found another specialist to see and don’t want to go back to the enemy of Blue Cross I also believe that the system needs effective complaints when a patient is wronged. Since I am not weak and feeble (yet) and am rather persistent we will see what the final outcome is.
    I suspect that most folks who have problems with insurance coverage just find another provider and never say a thing about it to the insurer.

    3. Providers around here require patients to sign a variety of illegal forms when they first come-in acknowledging, for example, that they will pay for whatever the insurer does not (not allowed for Medicare covered treatment).
    They also have recently taken to trying to force patients to sign mandatory arbitration forms on arrival at the Docs office (I have been told it is the malpractice insurers who are driving the mandatory arbitration forms) and to force patients to allow their Driver’s Licenses to be photocopied under the pretext of the Federal “Red Flag” anti-terrorist rule (which specifically exempts medical providers). This is illegal under California law for any patient who pays the bill with a credit card and is also an invitation to identity theft.

  5. “(I have been told it is the malpractice insurers who are driving the mandatory arbitration forms)”

    That reminds me, one way to bribe doctors into endorsing a universal Medicare system is for Uncle Sam to take on medmal liability for all Medicare patients. Congress has already extended “government doctor” medmal coverage to docs working in nonprofit community health clinics. By nationalizing medmal and health insurance at the same time, the $200 billion in premiums now paid by doctors would stay in their pocket. All future medmal claims would be filed against Uncle Sam in federal court (bench trial only).

    The beauty of it is, that $200 billion (roughly what’s collected in Part A taxes now) boost in real Medicare reimbursement rates is off budget in terms of CBO scoring. The Judgement fund is an unlimited permanent appropriation to pay out on lawsuits Uncle Sam loses.

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