Orszag and Emanuel (the other one) today presented their reasons why the new health care plan will "bend the cost curve" in NEJM. They state:
Yet “bending the curve” of health care inflation also requires a more direct change in the way health care is delivered. Health care costs are unevenly distributed: 10% of patients account for 64% of costs. Many of these are patients with chronic conditions, such as congestive heart failure, diabetes, and hypertension. Sustained cost control will occur only with more coordinated care that prevents avoidable complications for patients with chronic illness. As Stanford’s Victor Fuchs has noted, coordinated care requires three “I”s: information, infrastructure, and incentives.
As we have noted before the truly bend the curve one must address the demand function as well. The above statement reflects costs as the control mode whereas for the chronic illnesses one should focus equally if not more so on the demand curve, not the supply curve only. Diabetes is nearly preventable, at least the Type 2 variety. We have argued that for well over a year now despite the attempts by economists to deny what the literature states. Yes 10% of the patients take up 64% of the costs and those 10% have chronic disease which is properly motivated are preventable. The current bill does little is anything top address that issue.
They then continue:
The most important institutional change in the ACA, however, is likely to be the establishment of the Independent Payment Advisory Board (IPAB), an independent panel of medical experts tasked with devising changes to Medicare’s payment system. Beginning in January 2014, each year that Medicare’s per capita costs exceed a certain threshold, the IPAB will develop and propose policies for reducing this inflation. The secretary of HHS must institute the policies unless Congress enacts alternative policies leading to equivalent savings. The threshold is a bit complex; initially, it is a combination of general and medical inflation, but in 2018 and thereafter, the cap is set at general inflation plus 1%.
This will be a system of price controls. It will drive many physicians out of the Medicare system unless the Government mandates that they participate. We have already see the change occur. Medicare payment controls will also result in the reduction of care in the event of mandated coverage because the more the provider provides the more they lose. Thus the less they will do if so mandated.
It will be another three to five years before we see the disasters start to pile up but let it not be said that the people were not warned.
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