Selling Health Insurance Across State Lines Won’t Save Money

An idea that sounds easy is too complicated to work.

The effort to replace Obamacare faces increasing challenges, the more it is subjected to the harsh light of scrutiny. A good example is the proposal, apparently central to the Republican replacement plans, to allow people to buy health insurance across state lines.

This idea has been put forward as an elixir to all sorts of health sector problems. In his joint address to Congress, President Donald Trump argued that allowing people to buy health insurance in other states would “create a truly competitive national marketplace that will bring costs way down and provide far better care. So important.”

From Bloomberg View – Articles by Peter R. Orszag


Here’s How Trump Will Change Obamacare

Congress will take symbolic steps while states do the work.

Promises made by Donald Trump and Republicans in Congress to repeal and replace the Affordable Care Act are proving to be more complicated than they sounded on the campaign trail. With reality now setting in, what’s most likely to happen?

I expect to see Republicans stage a dramatic early vote to repeal, with legislation that includes only very modest steps toward replacement — and leave most of the work for later. Next, the new administration will aggressively issue waivers allowing states to experiment with different approaches, including changes to Medicaid and private insurance rules. At some point, then, the administration will declare that these state experiments have been so successful, Obamacare no longer exists.

In other words, the repeal vote will be just for show; the waivers will do most of the heavy lifting.

From Bloomberg View – Articles by Peter R. Orszag


Chicago’s Model Health-Care Fix

It may not seem obvious from news reports, but health-care costs in the U.S. have been growing remarkably slowly. Among the many forces that have caused the slowdown are efforts such as those by Chicago Mayor Rahm Emanuel to change how health-care dollars are spent — a strategy that other cities and states can learn from.

For the past five years, Chicago has kept its health-care bill for employees and retirees roughly flat, at about $450 million a year. And reflected in this success are reforms that hold much promise for the future.

From Bloomberg View – Articles by Peter R. Orszag

Another Piece of Obamacare That Trump Should Keep

To get a sense of the future of American health care, amidst the post-election uncertainty, watch what happens to the Center for Medicare and Medicaid Innovation. This agency, created as part of the Affordable Care Act, has attracted substantial opposition. A recent proposal to change reimbursement to doctors for administering certain drugs, in particular, has led to calls that it be abolished. But let’s hope the center survives, because it could prove crucial to any new effort to raise the value of health care in the U.S.

From Bloomberg View – Articles by Peter R. Orszag


We Already Have Health-Risk Scores. Now Let’s Use Them.

Most Americans know they have a personal credit score, and many know where to find it. Few know they also have a personal health-risk score. If these were better known, and better constructed, health insurance markets in the U.S. would work more smoothly.

Commercial health insurance plans, as well as Medicare, Medicaid and other government programs, generate risk scores every year for most of the people they cover. These scores are estimates of each person’s cost of care, compared with the average costs in a large population. And they play a big role in health insurance; they’re often used, for example, to determine how much more insurers are paid for sicker beneficiaries.

From Bloomberg View – Articles by Peter R. Orszag

Health Care Costs and Patient Health

Healthcare costs vary greatly depending on where you are. While this fact is empirically known there is some debate about the reasons why. For decades, the Dartmouth Atlas of Health Care has published research indicating that the varying healthcare costs are attributed to differences in practice. That is, different hospitals go about treating illness in different ways, each resulting in different costs. What the Dartmouth team also finds, most notably, is that higher costs do not parallel higher quality. Therefore, it should be possible to reduce costs without diminishing quality of care. This position has been acknowledged and embraced publicly by many leaders in this arena, including American economist Peter Orszag.

Peter Orszag

Do health care costs relate to quality of care? (photo: Getty Images)

However, a new Brookings Institute report disagrees. Louise Sheiner, a senior fellow at Brookings, accepts that healthcare costs differ geographically, but asserts that varying methods of medical practice are not to blame. Rather, her report claims that the overall health of patients is what causes the variation in cost. Essentially, the states with higher healthcare costs have sicker people. Those states have sicker people, she explains, because of socioeconomic factors affecting the need for medical care.

The correlation between costs and overall health is the crucial point of the two perspectives. Sheiner holds that a diabetic patient in a state with a high prevalence of diabetes is ultimately less healthy than an apparently similar diabetic person in a state where diabetes is less common. Based on this position, the variation in Medicare costs across states is caused mostly by the underlying health of the people in the state. How doctors treat patients has no effect at all.

A way to examine this idea is by analyzing the spending of people on Medicare as they move from one state to another. A recent paper produced by academics from MIT and the University of Chicago examined just that, and found the costs changed as soon as Medicare beneficiaries moved. That change happened regardless of if they moved to high-spending area or a low-spending one.

From that, we can determine that the overall health of a patient determines, at most, half of the differing costs. It is starting to look better for the Dartmouth team.

Also, consider how easily health care costs can vary. A patient’s bill will vary greatly depending on what hospital the ambulance takes them to, though the quality of care will not.

So what we know is that health care costs fluctuate significantly and overall health of patients cannot account for the majority of it. Therefore, there most be ways to lower costs without diminishing quality of care — good news for Americans.

from Peter Orszag Healthcare