The ongoing reform debate often tends to obscure a very basic fact - that insurance is expensive for groups of beneficiaries that consume a lot of care. Basically insurance premiums track the cost of care. Administrative costs and profits are merely icing on the cake. So it is impossible to have much impact on premiums without cutting care.
A basic goal of healthcare reform is bringing costs under control, which will inevitably involve squeezing out a massive amount of overtreatment that now occurs. Imposing a tax on abnormally expensive health insurance - the so-called Cadillac-plan tax - may be an effective way of reducing this overconsumption. In the absence of a proven strategy, I think it is worth a try.
There is ample evidence that care could be cut significantly - perhaps by 25% or more - without jeopardizing today's outcomes. A Medicare patient in Santa Fe or Minneapolis is as likely to be cured as one in Miami, New York or McAllen, Texas, but the costs in the first set of cities are often less than half of those in the second.
Unfortunately, no one has yet figured out how to translate these documented disparities into an action plan that would introduce such less-aggressive medicine to high-cost communities. Less-aggressive generally means more watchful waiting and fewer tests and surgical procedures.
If we could bring Minneapolis medicine to McAllen, today's cost pressures would abate.
Providers are generally comfortable enough with the status quo to strongly and successfully resist change. When insurers and employers invented managed care in an effort to impose efficiency in the 1990s, they were beaten back.
The Cadillac-plan tax would present another opportunity to try. Conventional wisdom, which I accept, is more directed at encouraging behavioral change than raising money. The theory is that employers and employees will go to great lengths to create plans with premiums below the tax threshold.
Critics of this idea think they'd do so by cutting coverage and making those covered pay a higher percentage of their health bills. They argue that such plans tend to now offer unusually extensive coverage now that would inevitably be trimmed back. They imagine today's benefits as an extensive menu resembling the multi-page offerings of a Chinese restaurant.
A recent Health Affairs study challenges this perception, suggesting that less than 5% of the premium variance was caused by the scope of coverage offered.
Instead, it appears that premiums are driven by geography and intensity of care. The most expensive plans are offered in areas with high costs where aggressive high-intensity medicine is the norm, places like Boston and New York.
To resume our menu metaphor, those in expensive plans are eating often and ordering the most expensive items available.
In our world, there's little chance we can equalize the bill for daily hospital care delivered in Manhattan or Minot. That means the focus has to be on delivering less intensive care, which is diplomatic language for doing less.
The challenge lies in promoting a plan that will practice Minneapolis-style medicine in Philadelphia. That's never been done, partly because we don't know how. My guess is that the Cadillac-tax will create a positive change in the environment that will make it easier to do so.
Insurance buyers - employees and workers alike - will be more interested in considering a high-quality low-intensity plan that intervenes less than is typical in their community if the alternative is staying with the status quo and paying the Cadillac tax.
There's no guarantee we'll see that result - and none that we won't. It will cause particularly acute problems of adjustment for certain types of employers in particular geographic areas. Such disparities are the baggage that comes automatically with any new tax.
But if our focus is on making the system more efficient -which ultimately means providing the minimum amount of care needed to keep us healthy - this tax strikes me as a promising strategy of moving us toward this goal.