both parties agree that the biggest problem in American health care is cost. The closest thing Republicans have to a health-care plan — Rep. Paul Ryan’s budget — is focused on cutting costs. Now leading Democrats tell Sarah Kliff that now that Obamacare is up-and-running they’re going to turn their attention to cost. It’s as if the point of having a health-care system is to spend less on it.
But both parties are wrong. Cost is not the biggest problem in America’s health-care system. Value is….
take Obamacare’s surprising success holding down premiums in its private insurance offerings. The innovation there is “narrower networks“: insurers are regulating where people can go for care more tightly. That cuts costs by cutting access to expensive providers. But while I think narrower networks are a good idea, there’s no evidence that they improve quality….
Value is defined as stuff divided by price of that stuff. In the framework that Klein is using, value is health divided by the cost of achieving that health. I think he is missing two very big things in his argument.
Reducing the denominator, in this case the cost of services by increasingly using narrow networks to exclude very high cost providers reduces costs. He is arguing that narrow networks for them to improve value have to also increase the numerator. That is a quick sleight of hand. So far all of the evidence has shown that narrow networks have the same value. As a basic matter of math, holding the numerator constant while shrinking the denominator makes the dividend bigger.
My six year is trying to teach herself long division and this basic concept is blowing her mind.
Secondly, and this is the more disappointing thing as I know Ezra knows better (given how much he was in love with Quality Health Partners at WonkBlog) but PPACA and the Centers for Medicare and Medicaid (CMS) have plenty of experiments that are seeking to improve total health at either budget neutral or budget positive terms. I know on the ACO models are aggressively trying to increase health while also decreasing costs. Some are succeeding at both counts while plenty more are succeeding at holding quality constant at lower costs. I know the Medicare penalities for re-admissions have been driving better health and lower costs. I know other care coordination efforts are ongoing; some will work, some will muddle through and others will be failures, but there are plenty of attempts to move both the end product (better health) and cost needles in oppositive and improving directions.
Will they all work? No, but there is a consensus that the value proposition for American medicine sucks, and plenty of ideas to change that value proposition so value increases by either better health, lower costs or both.