What is Happening to Health Care in America?

What is happening to health care in America? I doubt that anyone really knows and here is why.

(1) Consider the alphabet soup of acronyms that are part of health care reform: PQRS, ACO, VBPM, ESRD, MSSP, PCMH, MCN, NCQA, HEDIS, VBP, OQR, IQR, CMMI, EMR, HDHP, PHS, PDP, MA-PDP, OOP, TrOOP, IDN, RAC, COE, QHP, EHB, FEHBP, SGR, CO-OPs, SHOP, and SCHIP.

Did I forget any? Can anyone keep these acronyms straight and does anyone really understand them all? And it's not like the field of medicine was simple to begin with.

Imagine that the Internal Revenue Service just popped into being. Who would have really understood all the implications? For instance, who would have anticipated tax withholding? Who would have anticipated such a complicated tax code, with over 500 different IRS tax forms? Who would have anticipated the IRS busting Al Capone, when other government agencies found it so hard to implicate him in other crimes? It is difficult for us to make such predictions when there are so many moving parts.

(2) Things are still in flux with health care reform. The government is still writing the rules and the government may change the rules later. For instance, the CLASS Act was scrapped after it was found to be unsustainable.

(3) There are multiple levels of rules and multiple players and interdependencies galore. Some of the rules apply to some of the players while other rules apply to others, but what happens to one player affects other players. For instance, whether employers decide to drop their employee health insurance coverage will affect health insurers and employees, who then will affect physicians and pharmaceutical companies. And so on and so on.

(4) Health care is being reformed via the government with input from industry and other interested parties. Did they understand the situation? How deeply did they look into their proposed solutions? Did they consider both intended and unintended consequences? When considering the federal government's track record, I am reminded of a famous Milton Friedman quote:

"If you put the federal government in charge of the Sahara Desert, in five years there'd be a shortage of sand."

(5) Policies and rules are frequently described in terms of intents and objectives, using fluffy words like "coordinating patient care" and "managing quality and costs" and "accountable provider." What do these really mean? More importantly, what situations will they create and what incentives will face the people in the trenches? What behaviors will these rules create that are the exact opposite of the government's intentions? What new scams will these rules breed?

(6) Many of the changes are being imposed from the top-down instead of from the bottom-up.
Does that remind you of a particular Cold War adversary? If we are smart, we can learn from the Soviet Union's demise. In the old Soviet Union:

"The fact that factories were judged by rough physical quotas rather than by their ability to satisfy customers--their customers were the state--had predictably bad results. If, to take a real case, a nail factory's output was measured by number, factories produced large numbers of small pin-like nails. If output was measured by weight, the nail factories shifted to fewer, very heavy nails." [David R. Henderson, The Joy of Freedom: An Economist's Odyssey, Prentice Hall, 2002, p. 37.]

As the Soviets found out, operating an economy in a top-down mode is not only difficult, it is inefficient and it doesn't address the real needs of the people. So I think we can safely predict that the government will find that its latest foray into health care will be more problematic and expensive than anticipated.

What will happen to our American health care system? I am not sure and I doubt that anyone, especially Nancy Pelosi, who was unsure what the bill contained when she voted for it, fully understands. Buckle your seat belts, folks, because we are in for an interesting ride.

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