The only way to control the cost of health care is to spend less on health care, not less on health care insurance. The only thing that lowering health care insurance costs will accomplish is to reduce overall access to care as providers of care will not be able to afford to treat as many patients who want care if reimbursements are reduced. If reimbursements are not reduced, then insurance companies will go bankrupt. The idea that bringing 30 million people into insurance plans, particularly into Medicaid, the central idea of the Senate bill, will lower costs by spreading administrative costs over a larger population is appealing to economists but it does not take reality into consideration. It might work if the health care delivery system were able to accommodate all the new demand at the lower reimbursements. It is not. There are not enough primary care doctors, specialists, and hospitals with enough spare revenue to treat patients for minimal payments.
The new mantra, according to Atul Gawande, who wrote about it in a recent essay in The New Yorker, is that the various demonstration projects in both the Senate and the House bills will show the way to cost controls. These proposals do have the potential to lower costs–but patients are not going to like the new mechanisms. The country experienced the approach once before in the form of true managed care in the 1990s. Health care costs did fall in the mid 90s but Americans hated it–really hated it. They did not like gatekeepers preventing access to medical specialists and high tech care. Prepaid healthcare and tight budgets, the essence of the demonstration projects can be effective at holding down costs but they give physicians a strong economic incentive to limit care. In these models, physicians can have a perverse incentive as their net income rises when they provide less care and restrict access to high cost tests and therapies. Organizations like Kaiser Permanante on the west coast have been able to succeed with this model but it is the exception that proves the rule. Overall the PPO (preferred provider organizations) have been much more popular as an insurance model given its fee for service payment mechanism. Most European countries have rejected the pre-paid care approach just for the reason that it tends to undermine trust between doctors and patients.
