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Monday, September 04, 2006

Paul Krugman: Health Policy Malpractice

The administration has made health care policy choices consistent with its private sector ideology and the preferences of supportive special interest groups even though there is strong evidence that other choices would provide better health outcomes at a lower cost:

Health Policy Malpractice, by Paul Krugman, Commentary, NY Times: Let me tell you about two government-financed health care programs. One, the Veterans Health Administration, is a stunning success — but the administration and Republicans in Congress refuse to build on that success, because it doesn’t fit their conservative agenda. The other, Medicare Advantage, is a clear failure, but it’s expanding rapidly thanks to large subsidies the administration rammed through Congress in 2003. ...

The key to the V.A.’s success is its long-term relationship with its clients: veterans, once in the V.A. system, normally stay in it for life. This means that the V.A. can ... make much better use of information technology than other health care providers. ... which reduces both costs and medical errors. The long-term relationship ... also lets the V.A. save money by investing heavily in preventive medicine, an area in which the private sector — which makes money by treating the sick, not by keeping people healthy — has shown little interest.

The result is a system that achieves higher customer satisfaction than the private sector, higher quality of care by a number of measures and lower mortality rates — at much lower cost per patient. Not surprisingly, hundreds of thousands of veterans have switched from private physicians to the V.A. The commander of the American Legion has proposed letting elderly vets spend their Medicare benefits at V.A. facilities, which would lead to better medical care and large government savings.

Instead, the Bush administration has restricted access to the V.A. system, limiting it to poor vets or those with service-related injuries. And as for allowing elderly vets to get better, cheaper health care: “Conservatives,” writes Time, “fear such an arrangement would be a Trojan horse, setting up an even larger national health-care program and taking more business from the private sector.”

Think about that: they won’t let vets on Medicare buy into the V.A. system, not because they believe this policy initiative would fail, but because they’re afraid it would succeed.

Meanwhile, the Bush administration is pursuing a failed idea from the 1990’s: channeling Medicare recipients into private H.M.O.’s. The theory was that H.M.O.’s, by bringing private-sector efficiency and the magic of the marketplace to health care, would be able to do what the V.A. has achieved in practice: provide better care at lower cost. But ... [y]ears of experience show that H.M.O.’s actually have substantially higher costs per patient than conventional Medicare...

In 2003, however, the Bush administration pushed through the Medicare Advantage program, which offers heavy subsidies to H.M.O.’s. According to the independent Medicare Payment Advisory Commission, Medicare Advantage plans cost the government 11 percent more per person than traditional Medicare. Oh, and mortality rates in these plans are 40 percent higher than those of elderly veterans covered by the V.A. But thanks to the subsidy, membership in Medicare Advantage plans is surging.

On one side, then, the administration and its allies in Congress oppose expanding the best health care system in America, even though that expansion would save taxpayer dollars, because they’re afraid that allowing a successful government program to expand would undermine their antigovernment crusade and displease powerful business lobbies.

On the other side, ideology and fealty to interest groups make them willing to waste billions subsidizing private H.M.O.’s.

Remember that contrast the next time you hear some conservative going on about excessive spending on entitlements, and declaring that we need to cut back on Medicare and Medicaid benefits.

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Previous (9/1) column: Paul Krugman: The Big Disconnect
Next (9/8) column: Paul Krugman: Whining Over Discontent

    Posted by on Monday, September 4, 2006 at 12:15 AM in Economics, Health Care, Policy, Politics | Permalink  TrackBack (0)  Comments (11)

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