The hyperventilating rhetoric from the political extremes is receding as the legislative process moves ahead on health reform. While there are still many devilish details to be worked out, it now seems clear that a new law will be enacted that significantly reduces the uninsured population but has only a modest impact on constraining costs.
And costs, as numerous failed state Medicaid expansions over the years have proven, can sabotage the best of intentions. Arguments that there's significant overconsumption in the health area have gained a bit more traction than they had before, but are still far from the conventional wisdom they need to be before real change is possible.
Two little-noticed recent actions spotlight the relentlessness of cost pressures. First, the Federal government announced that the average health insurance premium charged civil servants and annuitants will rise by nearly 9%, an increase that far exceeds today's barely detectable inflation rate. Given the way the government negotiates, it is safe to say that this increase does not reflected bloated insurer profits.
A few days ago, the Mayo Clinic, often used as a poster child for how the system should work by reformers, announced that the primary care physicians in one Arizona facility would stop participating in Medicare. The resignation procedure requires a warning letter to each dropped patient and an absence from the program at least two years. Patients willing to pay their own way will have continued access to their physicians.
Doctors have been dropping out of Medicare for years, but infrequently in such large groups or with an explicit statement that they want more generous government payments.
Mayo is apparently doing this in an effort to make a political statement arguing that (a) the existing system underpays primary care physicians and (b) that providers who do an exemplary job should be paid more. But the clarity of that statement is clouded by Mayo's decision to have primary care physicians in other facilities continue Medicare participation and to continue participation by its specialists.
Inasmuch as those who argue about physician reimbursement generally say that specialists are getting more than they ought, to the detriment of primary care physicians, one could see the Mayo decision as a new way of gaming the system to maximize revenues. And while Mayo did say it thought primary care doctors should get more, it was silent on the question of whether specialists should get less.
These developments are interesting, but hardly unique. They suggest we face a continuing problem in paying our medical bills and there's scant reason to believe the new legislation will immediately provide a solution. History suggests that things may get worse. In the positive score for the Baucus mark, CBO notes its assumption that recommended cuts to Medicare providers will become effective despite numerous Congressional postponements and reversals in the past.
How that fits with Mayo's claim that current payments are inadequate is a question for another day.
Medical costs took a big jump in the 1960s when Medicare and Medicaid began operation and vastly boosted the size of the insured population. When the new system injects millions of new people into the insurance pool, there's every reason to believe that will happen again, if you use basic economic logic which holds that increases in demand tend to raise prices.
In the parallel universe we call medical economics, some have long argued that the uninsured drive prices up because they consume care they don't pay for, thereby requiring an invisible tax on the insured to reimburse providers for uncompensated care. By that logic, our insurance premiums should actually drop as the insurance pool expands. It would be imprudent to bet on that.
While we don't know exactly how this will play out, the new legislation will hasten the day when we get costs under control. If my pessimism is unwarranted, it'll do the job directly. But even if I'm right, the combination of new tools and added cost pressures created by the newly insured will hasten the day of fiscal reckoning.
One could argue that our political system is ultimately a one-trick pony that can only deal with a single priority. If so, I think Congress is making the right choice by expanding the covered population.
But all should be warned that this latest effort, however heroic, is but the latest chapter in a story that has some challenging twists ahead.
