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Reform Is Not To Blame For Rising Health Care Costs

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Jim Jaffe, is a former Congressional staffer who worked on economic, tax and health policy issues for nearly two decades. After leaving the Hill, he led the external relations efforts for the Employee Benefits Research Institute and the Center for Advancing Health. He currently writes for CenteredPolitics.com, a web discussion on public policy and politics and the Huffington Post.


(this post first appeared on Centered Politics)

In a development so predictable that it hardly merits being called news, American health care costs continue to rise and opponents of the new health reform law say the Obama plan is to blame.'  Some small employers report massive insurance premium increases.

There's some truth to this criticism.'  Insurance coverage has been expanded to cover older children and preventive services.'  Such modest expansions of coverage require at least modest premium boosts ' whether they'll later be offset by other reforms remains to be seen.'  As usual, the new law serves dessert first and saves the spinach for later.

Anticipation of what is to come far outweighs the cost of broader benefits. ' Everyone involved is preparing for an uncertain future by attempting to maximize their advantage at the start, a strategy that pushes everything up.'  All seem to have absorbed the unspoken central message that the reformed system aims to reduce consumption.

Patients disbelieve the promise that they will be able to keep the insurance they now have, sensing that employers will continue to slim options and, in today's economy, many are fearful that they won't have a job with good benefits in the future.'  So they press ahead to solve minor problems while they still have insurance to pay the bills.

Providers ' hospitals and physicians ' know that there will be continuing efforts to reduce reimbursement in the years ahead.'  By maximizing the services now, they simultaneously increase income while inflating the base that will be used as a benchmark for cuts in the future.

This tendency to maximize income before big, painful changes come is fed by the realization that Medicaid reimbursement is at risk now and Medicare reimbursement will probably be pushed down later.'  Providers have less clout in setting these rates.'  So it appears they will be increasingly dependent on payments made by private insurers, the core of today's cost pressures.

Finally, the new law pushes insurers in this direction by limiting the amount of money they can keep to a fixed percentage of what they collect, which means that the easiest way to raise profits is to increase premiums.

From my perspective, it appears that all forces are aligned at the moment for patients to maximize the amount of care they receive and providers to maximize the revenue it generates.'  The hope ' which members of both groups view as a fear ' is that the dynamic will change later.'  In any event, neither group will be disadvantaged by such behavior now.

Theoretically, I suppose, it could have been possible to draft a law with different incentives ' perhaps by promising priority corrective action in any metropolitan area where costs were significantly above average ' or increases exceeded the norm.'  For many obvious reasons, this wasn't done.

We can view the latest data as disturbing, but it is probably the inevitable result of any legislation that attempts to lower bills over time.'  Partisan rhetoric notwithstanding, there is no reason to believe that repeal would erase the numbers or reverse the trend.

Editors Note: :'  Related link- As Health Costs Soar, G.O.P. and Insurers Differ on Cause NYTimes March 4, 2011

More Blog Posts by Jim Jaffe

author bio

Jim Jaffe, is a former Congressional staffer who worked on economic, tax and health policy issues for nearly two decades. After leaving the Hill, he led the external relations efforts for the Employee Benefits Research Institute and the Center for Advancing Health.  He currently writes for CenteredPolitics.com, a web discussion on public policy and politics and the Huffington Post.   


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Health Care Cost   Pay for your Health Care   Jim Jaffe  


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