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Health Care: Why Price Controls Won’t Work — Again

Editor’s note: In this note from the Commonwealth Fund the point is made that we must find a way to counter the rising costs of Insurance Premiums. However the real imperative is to find a way to counter the rising cost of health care — not insurance per se.

While a public plan might be able to lower the cost of insurance or the unit cost of services, it will do that by ‘negotiating’ fixing by law the reimbursement rates received by providers (doctors, hospitals and others). The impact of that will be two fold – increasing utilization – providers will compensate by increasing the number of services they provide to increase their revenues and if revenues of providers are curtailed then there will be fewer entrants into the market and current providers in the market will leave.

Price fixing never worked to control inflation and it won’t control the health care market in ways that will also deliver high quality, access and affordability simultaneously.


Why Health Reform Must Counter the Rising Costs of Insurance Premiums

As health reform advanced through congressional committees this summer, much attention was given to trimming the federal budget cost and slowing the growth in Medicare outlays. But equal attention needs to be focused on provisions to address the rising costs of health insurance premiums for employers and families. In a new blog post, Commonwealth Fund President Karen Davis emphasizes that without health reform that controls premium costs, which are projected to rise to 24 percent of median family income by 2020, middle-class families will be priced out of health insurance altogether. A forthcoming Commonwealth Fund data brief (to be published August 20) outlines projected premium increases in detail, as well as how reforms that slow health care costs could help families regain financial stability.

Davis points out that while the Obama Administration may be scaling back its support for a public plan, Commonwealth Fund and Congressional Budget Office analyses show that offering a strong public health insurance choice as well as private plans through a health insurance exchange will help all Americans, not just the uninsured, by slowing the growth in premiums.

With a public plan tied to Medicare, the federal government would have the power needed to negotiate reasonable rates with providers—and therefore lower premiums. Davis observes that non-profit health cooperatives, which are being considered by the Senate Finance Committee, are not an adequate substitute for the public plan because they will not have this leverage. “Abandoning a public plan without proposing an alternative that would achieve real value and slow the growth in health spending undermines the long-term success of health reform and puts our economy at risk,” Davis says.

Davis outlines several alternative options, such as a government agency or non-profit entity acting in the public interest to negotiate provider payment rates and methods on behalf of the entire population, encouraging states to develop and implement all-payer provider payment reforms, and harmonizing Medicare payment innovations with private payers.

“The onus must be put on those who oppose a public plan to suggest an equally effective alternative that reforms payment methods, promotes delivery reform, and achieves value for health spending that is in the best interests of the American people,” Davis says.


August 18, 2009 - Posted by | Federal Government, healthcare | , , , ,

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