Economics, Health Care, Pethokoukis

Fed study suggests a central idea underlying Obamacare is wrong

A core idea at the heart of President Obama’s healthcare reform law is the notion that while expanding coverage is expensive, there are huge offsetting savings to be had from reforming how medicine is practiced by doctors and hospitals. Who knows, maybe a third of the $2.7 trillion spent on healthcare is wasted.

Now this notion is based mostly on the research of the Dartmouth Institute for Health Policy & Clinical Practice. It shows Medicare spending in some regions of the country is significantly higher than others. Kaiser Health News: “This geographic variation in spending, which the government has also examined, was a motivating force behind a number of government initiatives including changes in Medicare payment to reward hospitals and doctors who provide good care efficiently.”

And if that research is wrong? Well, then we have a problem. And a paper from a Federal Reserve economist suggests just that (via KHN):

[T]he variation in Medicare spending across states is attributable to factors that affect health and health behaviors, rather than practice styles. … It is not surprising that states in the South spend more on Medicare and have worse outcomes. These states perform significantly worse in numerous areas, including high school graduation rates, test scores, insurance, unemployment, violent crime, and teenage pregnancy. There are many ways that such differences can affect health utilization and outcomes, including differences in underlying health, social supports and social stressors, patient self-care and advocacy, ease of access to services, capabilities and quality of hospital and physician nurses and technicians, and cultural differences in attitudes toward care. A comparison of health spending in Mississippi with health spending in Minnesota is not likely to provide a usual metric of the ‘inefficiencies’ of the health system, nor is likely to provide a useful guide to improve the quality of care in places where it is lacking.

Certainly this is still an open issue, as the KHN article makes clear. But the fact that it is — and that we still rejiggered a fifth of the economy partly based on this research — should give policymakers pause — and perhaps a new found sense of humility.

3 thoughts on “Fed study suggests a central idea underlying Obamacare is wrong

  1. You make the assumption that “policymakers” are primarily interested in cost saving . If cost savings result in them having less control over everyone, that’s too big a price to pay. If I know precisely what we should all have for dinner and I’m not paying for it, why would it matter if I choose a more expensive restaurant?

  2. As the KHN piece opines, if only it were as simple as getting Mississippians health insurance and getting them to the doctor and the gym.

  3. Abysmalcare should never have been passed in the first place. Many Democratic Senators and Congressmen who voted for the bill did so in direct opposition to the will of the people they were elected to represent…instead going along with the Democratic mob. For instance, in Colorado 62% of the electorate polled was against the bill, yet Senators Bennet and Udall ignored their constituents and voted in favor of it.
    If “waste fraud and abuse,” buzzwords re. how some of this bill was to be paid for, 1) why wasn’t that matter taken care of anyway, but 2) it apparently isn’t/couldn’t be taken care of.
    Obama could have reduced healthcare spending markedly by 1) tort reform, to reduce doctors’ overhead and, more significantly, reduce defensive medicine expenses, and 2) (and Obama did just the opposite) allow doctor-owned hospitals, which are much more efficient than the administrator top-heavy, mistake-covering, hospitals run by non-medical CEOs and their controlling organizations of corporate run medicine. I have other suggestions, but these are good openers.
    This article does well to point out the disparities in populations used, but overlooked in writing in the Dartmouth, and other, articles.
    The absurdity of proposing that electronic medical records would significantly reduce spending was another fallacy promoted by Obama.
    And Obama already fails to pay doctors a reasonable wage for their services…Medicare reimburses doctors at such a low rate that 30% cannot even afford to see any Medicare patients (or Medicaid), many others limit the number seen. Medicaid is worse…and that is the rate at which doctors will be paid under Abysmalcare.

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