In light of the cost problems that still plague U.S. health care post-ACA, liberal wonks are pushing the idea that we need to go further left in health care policy. Single-payer is the most obvious and natural idea for the wonk to turn to, but there’s an immediate snag: the recent attempt to construct a single-payer system in liberal Vermont failed. So Vox—a bellwether for liberal health care wonkery—is pushing something different: all-payer rate-setting. In the second Vox article recently to appear on the subject (here’s the first), Sara Kliff makes the case that all-payer rate-setting could be both good policy and more politically feasible than a single-payer system.Kliff argues that rate-setting of that kind gives insurers more leverage over hospitals and reduces administrative costs. She then links it to slower rates of health care spending growth in other countries. But what about in America? Kliff notes that 10 states tried all-payer rate setting in the 1970s and 1980s. All but one abandoned it, in part because there was no conclusive evidence that this approach actually brought down the state’s overall health care costs. The one state that remains—Maryland—shows why:
But much like the other states who abandoned rate-setting, there’s also evidence that Maryland’s system hasn’t slowed overall health care spending growth — that admissions to Maryland hospitals have grown so quickly that they negated the really slow growth in prices.Much of this research comes from Pauly, who published a 2012 paper looking at health care cost growth in Maryland and other states. He found that per person hospital spending grew 5.1 percent in Maryland between 1990 and 2009. Over the same time period, per person health spending in the rest of the country grew by 4.7 percent.Pauly says that “nobody knows” why hospital admissions increased faster in Maryland over this time period. It’s possible it had to do with the rate-setting system. “It’s possible if a hospital isn’t paid very much, they make up for that with more frequent admissions because you need two admissions to make up for one at the lower prices,” he says.
It’s almost like top-down regulations can have unintended consequences that undermine their original purpose. In health care this often happens whenever regulators try to bring down prices from the top—providers find creative ways of evading the regulations. It’s not clear what Vox hoped to accomplish with a piece like this that advocates for an idea it refutes. But rather than trying to revive a failed idea of all-payer rate-setting as a intermediate step toward the other failed idea of single-payer, the Vox set would do better trying to figure out how to restore power to the health care consumer, starting with price transparency.