(Bloomberg View) — Rather than renew their failed effort to repeal and replace Obamacare, President Donald Trump and congressional Republicans should move on to another aspect of health care: the need to contain costs and improve value.
Such a shift would allow them to be far more productive. For many if not most Americans, cost trends and value matter more than what’s happening on the individual insurance exchanges. Progress on this front would raise people’s take-home pay and improve the nation’s long-term fiscal balance, while also constraining the growth in premiums for those who buy insurance on the exchanges.
All the recent debate over the individual insurance market has made it easy to lose sense of the broader picture. In 2015, more than 155 million Americans received health insurance through an employer, and another 43 million, through Medicare, according to the Kaiser Family Foundation. Roughly 80 million more received coverage through Medicaid or the individual market – the areas where Obamacare expanded access – but even here, most of the coverage still reflects pre-Obamacare Medicaid. Consider that repealing Obamacare would reduce insurance coverage by about 30 million people in 2026, according to the Congressional Budget Office. While that’s a very large number, the population with coverage through other sources is many times greater, and these Americans still spend too much for too little on health care.
So what could the Trump team do to improve value? The way to start is by addressing the extreme variation in health costs across the U.S. Within Medicare, most of the variation reflects the amount of care provided – especially in post-acute care (the care a person receives after he or she leaves a hospital, including in skilled nursing facilities). Within the world of employer-provided insurance, in contrast, most of the variation reflects prices paid.
The accumulated evidence suggests that more care is not better, at least on average. That has been confirmed by clever research just published in the Journal of Health Economics, which analyzed how costs and outcomes vary depending on which ambulance company happens to pick up a particular patient. It turns out that ambulance companies tend to funnel patients to particular hospitals, so the rotation among ambulance companies provides an almost random rotation of patients to different hospital systems. The results show that there is little if any connection between overall spending and subsequent mortality rates. But they also show that higher in-hospital spending seems to be associated with better outcomes.
In contrast, higher levels of spending after patients leave the hospital (the part that drives variation in Medicare costs) is associated with lower-quality care.
These results light the path forward for President Trump: Find ways to lower prices in employer-provided insurance, and to reduce utilization (especially of post-acute care) in Medicare. In future columns, I will explore each of these paths in more detail.
This agenda would also enable Trump to involve Democrats, whom he will need as part of a new governing coalition to pass spending bills and a debt limit increase this year. After all, plenty of Democrats would rather find ways to deliver better-value health care than debate proposals to take people’s insurance coverage away.
— Read Health Insurance Bill Dealmaker Draws Fire From Both Sides on ThinkAdvisor.