When Obamacare was first debated, many supporters argued that it would do as much to make health care more affordable as to expand access to insurance—hence, as Nancy Pelosi still insists, the name the “Affordable Care Act.” But there’s was also a class of supporters who realized this was misleading, and sought to cast Obamacare as what it is: a program that expands insurance but does little to bring down costs.Now that position is getting more and more traction. Vox has a helpful listicle up on what insurance can and cannot do. Though in the end it’s intended as a defense of the ACA, the piece does a good job summarizing a lot of the research on health insurance. It points out the insurance has costs and benefits: it can help financially struggling families, but it also increases unnecessary ER use and inflates health care spending. Most importantly: expanding it does not, on the whole, reign in costs.There are some omissions throughout. Oddly, the article mentions the Oregon Medicaid study twice early on but fails to note that study’s most controversial finding: that there were no significant physical health differences for those with Medicaid and those without it. But overall it’s a useful primer on insurance—until you get to the end. Item number 11 (the last item in the listicle) is entitled “we needed to increase insurance coverage before we tried to restrain health spending.” Here’s the argument for why, which the piece quotes from an earlier article by Len Nichols:
Fiscal hawks will still ask why we can’t contain cost growth first and expand coverage later. This is a fair question — although the Congressional Budget Office has determined that both the House and Senate health care bills reduce the deficit, and a choice that forces the growing number of uninsured to wait another decade would, in my view, be immoral. Nevertheless, the simple answer to the hawks’ question is that it is not feasible to tackle costs without tackling coverage. Our delivery system could not withstand the stress. Two thirds of hospitals lose money on Medicare now. Virtually all lose money because of Medicaid underpayment. To impose serious delivery reform and incentive realignment while leaving hospitals on the hook for the mounting billions of dollars in uncompensated care would bankrupt many and strain most to the breaking point. With expanded coverage, we’ll get absolutely essential hospital cooperation. Without expanded coverage, hospitals will have to protect themselves from change, and their local communities will want them to.
This, in essence, is the argument: if we force more people to use hospitals, hospitals will return the favor by lowering costs. There’s a lot to say about this, but will content ourselves just with the following observation. In 2011 to 2012 hospital prices for basic procedures increased by as much as four times the national inflation rate. And though the FTC appears to be getting more aggressive in breaking up medical monopolies, hospitals continue to merge and absorb private practices, jacking up prices even more. Meanwhile, a small number of doctors are becoming rich off of Medicaid overpayment—and lets not forget the high salaries that hospital CEOs earn and the guild-like behavior that keep salaries for hospital doctors higher than they should be.The belief that more customers would lure hospitals into slashing prices looks increasingly naive, don’t you think?