October 9, 2015
Last Monday, Ezra Klein wrote a smart piece at Vox: The point of a health-care system isn’t to spend as little money as possible on it. His central point is spot-on. As I explained years ago, it’s a misconception to infer that Americans spend “too much” on health care simply by observing that U.S. health spending is a higher fraction of its GDP than in any other country. What matters is whether we are getting good value for the money–a point driven home in Mr. Klein’s piece. But he gets one very important point wrong–or at least very incomplete. He writes:
But many efforts to cut costs don’t look to improve quality. Higher deductibles and copays, for instance, really do cut spending — but there’s no evidence that they lead patients to get better care. We’ve known since the Rand Health Insurance Experiment in the ’70s that when you make people pay more for care, they cut back on both high-value and low-value treatments.
The RAND Health Insurance Experiment (HIE) did indeed find that people seemed to be indiscriminate in the fashion that they cut back on care under cost-sharing. But that makes it sound as if choosing between Canadian-style free care (Canadians pay no cost-sharing) and American-style cost-sharing is a flip-of-the-coin proposition. That is, we can choose between higher cost/higher quality free care or lower cost/lower quality care under cost-sharing. The way Mr. Klein frames it might lead the naive reader to conclude that the value-for-money proposition is the roughly same since those facing cost-sharing cut back on valuable care at the same rate as less-valuable care.
Read the full article at Forbes.com: Senator Bernie Sanders, Free Health Care Is A Spectacularly Bad Idea