Posted by: Jeff | April 5, 2010

Some Metrics for Judging Health Care Reform

Hopefully, I’ll be posting much less, if at all, on health care in the near future. However, now that the reform has passed, laying down at least some crude predictions by which we might measure its success in the coming decades seems worthwhile. To that extent, I agree with Megan McArdle that, since lots of statistics about death rates due to lack of insurance coverage and so forth got thrown around in the debate, intellectually consistent defenders of this reform (like me!) ought to be willing to put their money where their mouth is.

Of course, I’m just a guy blogging out of Hollywood who takes an armchair interest in this stuff, so take the following in that spirit:

1) I’ll take the low-bound and say we should see a drop of at least 20,000 in the death rates due to lack of insurance. But I agree with Ezra Klein that proper research on this takes time, so I’d hold off the time frame for results until 2030 or 2040. I’m hoping to see a far greater drop – in the 30,000 to 40,000 range – but 20,000 strikes me as the lower limit for at least calling the reform a qualified success.

2) I really can’t speak with any specificity on how much this reform should do to relieve medical-related bankruptcies. But I buy McArdle’s logic that this should be one of the earliest and easiest to measure results. So let’s say by 2020 we should be seeing a significant statistical drop in that area.

3) I’m in full agreement with Klein on these two points:

1) The excise tax will go into effect on schedule, but it might be indexed to inflation plus one (or even two) percentage points, rather than just inflation.

2) The Medicare cuts will also go into effect with very few, if any, changes.

That’s pretty much the polar opposite of what McArdle is predicting. This is one of those funny instances where I think someone is actually being too cynical about our political process. For one thing, I think it’s pretty likely that deficit politics will enjoy an historically unusual degree of prominence in the coming years, and this will push against repeal of things like the excise tax or the Medicare cuts. I also think the argument that Congress won’t have the political will to stick with these reforms gets most of its steam from what happened with the Medicare Sustainable Growth Rate. And one example is a rather bad data set for predicting the behavior of something as large and complex as Congress. Our political system has learned from that episode on how to be smarter about this sort of thing. Not to mention that if they don’t stick to these cuts, then they don’t have the political will to reform Medicare at all, and we can all throw up our hands in defeat and go home.

4) I also agree with Klein that there’s a very good chance (he pegs it at 60 percent) that the savings to the budget from this bill will be significantly greater than what was predicted by the CBO. And I’ll take his number of over $1.5 trillion between 2020 and 2029 as a signpost.

Obviously, I’d consider anything less than the CBO’s predictions to be a disappointment, but given the cautiousness of the institution I think that possibility is extremely unlikely. And I can think up two reasons for this right off the bat. One is this:

There is a chance — say, 30 percent — that the Independent Payment Advisory Board (the Medicare commission) becomes an extremely, extremely important government body.

The other is the collection of pilot programs for delivery system reforms included in this bill, a point which has gotten rather weird treatment. The CBO scored the savings from these programs at zero, but that’s not due to any meaningful assessment. The simple fact is we’ve never tried anything like this before, but these programs represent the best thinking on the subject we have available. Still, we don’t ultimately know, so the CBO, being the (temperamentally) conservative entity it is, didn’t try to predict anything. This was perfectly appropriate within the ken of what the CBO does, but it had the unfortunate side-effect of giving conservative and libertarian critics of the bill (like McArdle) an excuse for talking as if the delivery system reforms don’t deserve to be taken seriously at all. So I’ll repeat Klein again, and predict that at least one major cost control reform will emerge from this bill that no one has even thought to discuss right now.

5) I think McArdle’s right that we’ll probably see another major fiscal crisis in the next decade or two. And yes, the low-hanging fruit of cuts to Medicare will not be available to shore-up the budget because we used them to pay for this new entitlement. This doesn’t bother me for two reasons. One, the structural problems with Medicare are far too severe for the low-hanging fruit to have made any meaningful difference when our long-term fiscal crisis finally comes a-callin’. Two, this new entitlement was the sugar that helped us swallow the medicine of cost-control; the exchanges, the Medicare commission, the delivery system reforms, etc. In other words, I think using the Medicare cuts to fund this new entitlement allowed us to strike political deals that will slow the growth in health care costs, and thus do far more to alleviate any coming fiscal crisis than the Medicare cuts on their own would have accomplished.

6) McArdle thinks there’s no way we’re going to slow the growth in health care costs anything like 1.5% a year. I don’t know how long the time frame for meaningfully measuring that would be. But assuming we can settle on it, let’s call 1% a modest positive and 1.5% a roaring success, shall we?

Like I said, I could be talking nonsense with these predictions here. But I think it’s important to lay down metrics for success before the fact rather than after. That way, both myself and any readers who wish to hold my feet to the fire can come back in 20 or 30 years and determine if this reform, which I enthusiastically supported, was a good idea after all. And hopefully learn from those results.

Obviously, waiting until I’m 50 to know if this thing panned out will be frustrating. But like Joe said in our podcast, health care reform is about keeping your eye on the long game. And there will be at least some results we can assess much quicker than that.

I just hope the WordPress servers are still around come that time, having survived the cataclysms of 2012 and the mutant zombie apocalypse and such.


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