Unbendable?

“I am not the first president to take up this cause, but I am determined to be the last.” President Barack Obama retook control of the drawn-out national debate on health-care reform with his recent address to Congress. Some amalgamation of the five bills currently before Congress will probably become law this year.

This final bill will have three major objectives: providing near-universal coverage, improving the quality of health-insurance policies, and controlling the cost of health care (often wonkishly referred to as “bending the cost curve”). Although the legislation is likely to accomplish the first two goals, stemming health-care inflation will prove more elusive.

ESPN anchor Dan Patrick’s catchphrase, “You can’t stop ’em, you can only hope to contain ’em,” could easily describe health-care costs. This year, national health spending will account for over 17 percent of GDP, outpacing all other countries. It has grown twice as fast as GDP since 1975 and shows no signs of letting up. Reversing this unsustainable trend is critical to any health-care plan, since maintaining universal coverage and insurance reform requires lowering costs in the long run.

Congress has offered worthwhile, partial solutions. Universal coverage will allow everyone to visit a doctor before minor health issues turn into expensive, life-threatening ones. A proposed insurance exchange for individuals and small businesses will promote greater competition between insurers, making coverage cheaper. Cutting Medicare reimbursement rates will encourage greater efficiency from doctors and hospitals. These provisions will achieve real cost savings from day one.

But other policy measures that offer larger savings exist, such as a robust public option, medical malpractice reform, and direct negotiations with pharmaceutical companies on drug prices. Aside from the public option, these potential “game-changers” have received inadequate consideration from Congress.

Significant debate has emerged on the merits of a public option—a government-run, non-profit, health-insurance plan that would compete with private insurers. Although conservatives have derided the public option as an unnecessary expansion of government, there is a strong economic rationale for including it in the bill. In 34 states, five companies or fewer control the market for insurance available to small groups. These insurers’ dominant market shares make it difficult for new, private competitors to emerge, which keeps insurance costs high.

A public option stimulates competition by bargaining down prices, forcing private insurers to follow suit for fear of losing business. This should result in lower insurance costs for policyholders. Unfortunately, key congressional Democrats are backtracking on the public option; proposed alternatives, such as member-owned health-care cooperatives, will lack the market share necessary to challenge private insurers.

President Obama, in a sop to Republicans, spoke favorably of medical malpractice reform in last week’s speech. But his proposed action on this front (the creation of a committee to make recommendations to Congress) is a cop-out. This is not surprising, given trial lawyers’ support for the Democratic Party. Malpractice lawsuits, while a necessary recourse for victims of medical errors, impose a cost on health-care providers. Fearing lawsuits, doctors buy expensive malpractice insurance and order unnecessary tests. Juries, lacking medical expertise, are generally poor assessors of guilt: A study in the New England Journal of Medicine estimates that almost 25 percent of cases in which there was no identifiable medical error resulted in damages. Doctors pass on these costs to patients.

Instead, special health courts with expert judges should hear medical malpractice cases, a model similar to tax or bankruptcy courts. This would preserve plaintiffs’ legal right to sue while limiting unwarranted damages, reducing the cost of medical care. In a recent New York Times op-ed, former Senator Bill Bradley proposed a bipartisan compromise in which Republicans accept a public option in return for tort reform. Although political considerations probably make such a deal impossible, Congress should reconsider Bradley’s proposal.

In June, the pharmaceutical industry promised to reduce Medicare prescription drug costs by $80 billion over 10 years. While a step in the right direction, this concession requires the Obama administration to oppose future cuts in drug costs. A Republican Congress forbade Medicare to negotiate prescription drug prices with producers; predictably, costs remain high. Freeing Medicare to bargain with Big Pharma would save the government an estimated $90 billion annually. The Department of Veterans’ Affairs pays lower drug costs than Medicare because it is allowed to negotiate drug prices—it defies logic that one government agency can negotiate with the pharmaceutical industry while another cannot.

While far from perfect, the health-care plan outlined by President Obama deserves to become law. Nevertheless, it is disappointing that Congress has given short shrift to the solutions outlined here. Since these proposals offer major potential cost savings, lawmakers of both parties should willingly reconsider them—despite the fact that these ideas generate most of their support from one side of the aisle. To paraphrase Deng Xiaopeng, “Whether a pill is black or white makes no difference. As long as it works, it is a good pill.”



Anthony P. Dedousis ’11 is an economics concentrator in Leverett House. His column appears on alternate Thursdays.