Dec 24 2012
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In 2013, Let’s Embrace Our Intellectual Diversity

Neale Mahoney, PhD, is assistant professor of economics at the University of Chicago Booth School of Business, and a Robert Wood Johnson Foundation (RWJF) Scholar in Health Policy Research at Harvard University. This post is part of the "Health Care in 2013" series.

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If you’re looking for peace and joy this holiday season, don’t invite a liberal and a conservative health economist to your holiday party. Health economists from the political left and the political right tend to have very different views on what ails the U.S. health care system – and what should be done to fix it. After a glass or two of punch, they are likely to become loud and argumentative—dampening the holiday spirit.

But if you’re Barack Obama and John Boehner, and you’re looking to heal our health care system this holiday, invite over a few strident health economists and let the eggnog flow. There are important truths being articulated by both extremes of the health policy spectrum. A wise policy-maker would harness this diversity of wisdom.

Two examples make this point.

The first is the rather technical question of how to encourage appropriate use of medical care while discouraging excessive and wasteful spending.

Conservatives typically argue for increased cost sharing. Consumers need a “skin-in-the-game,” with co-pays, coinsurance and deductibles providing the incentives to cut back on unnecessary care. Liberals often argue that consumers are ill suited to decide what medical care is needed and financial incentives can have unintended consequences. A diabetic who skips his medication to avoid the co-pay damages his health and raises costs for society.

A wise policy-maker would not pick sides, but instead adopt the best of both approaches. Clearly there are cases where cost sharing is preferable. Only a patient can determine whether the comfort of a private hospital room with a flat-screen TV is worth the extra cost. In other circumstances, doctors are the best decision-makers. Rather than adopting the liberal or conservative position whole hog, the best approach is to apply these different approaches where each is best.

The second example is Medicare privatization or premium support—depending on your politics.

Here conservatives argue that financial decisions in our current system are too often captured by special interest groups, who are able through lobbying to add their category of care to the list of covered medical services. They argue that fixed salary government employees do not have the incentives to root out abusive billing by rouge doctors and hospitals. Liberals oppose a departure from the single-payer system. They point out that private insurers have incentives to cream-skim for healthy patients and to design policies that generously cover easy-to-anticipate medical costs while skimping on coverage for rare, hard-to-predict medical events.

Again, there is truth to both arguments. The question is not whether it is better to let a government bureaucratic or corporate executive decide what care to provide. The question is which decisions are best made by bureaucrats and which ones are best made by the private sector.

For what it’s worth, my hunch is that we want government to assure that coverage is provided for rare, hard-to-predict conditions, and the private sector to compete to offer the right amount of choice and coverage for predictable, discretionary care. We should have government regulate markets to discourage cream skimming while letting the powerful forces of competition work to reduce waste and abuse.

Health economists and policy experts have a tremendous diversity of opinions on how to fix our ailing health care system. Our goal is the same. We all want a system that provides world-class care at the lowest possible cost.

If you think about health policy, like I do, follow my lead this New Year. Make a resolution to engage with people with different opinions. You might learn more than you expect.

Learn more about the RWJF Scholars in Health Policy Research program.

Tags: Health Care in 2013, Scholars in Health Policy Research, Voices from the Field