Focus on supply of health care

In 2021-22, Congress may repeat the high-wire act that led to the Affordable Care Act (ACA) in 2010. Democrats are developing a package of healthcare spending items that would, by official estimates, cost $3.5 trillion.

Like the ACA, the legislation would almost certainly pass on a partisan basis via reconciliation—a byzantine parliamentary tool harnessed to evade Senate filibusters. As in 200910, this year’s bill would likely evolve over many months, with blockbuster provisions emerging toward the end.

The legislation currently exists only in skeletal form to which Congress will add details later.

But the early wording tells much.

The legislation would spend vast sums on healthcare by mandating new entitlements, enlarging existing programs like Medicare and Medicaid, and imposing price controls.

This approach is fraught with perils. Some proposed entitlements are already covered by existing programs. Some programs, such as Medicare, are already financially strapped. Proposed price controls would disincentivize innovation—such as the innovations that enabled manufacturers to roll out pathbreaking COVID-19 vaccines in 2020.

Like the ACA, the reconciliation bill focuses mostly on demand while downplaying supply. It would throw vastly more money at buying medical services without actually increasing the supply of such services to buy.

In some cases, as with price controls, the likely end result is fewer services.

Health economists John Goodman and Linda Gorman produced one of the bill’s best critiques.

They argue that the $3.5 trillion price tag results from budgetary tricks, with the true figure closer to $5.5 trillion. They argue that the bill would direct spending toward areas of healthcare that are already plagued by fraud, theft, substandard care, and bloated costs—while bypassing better alternatives that already exist. Economist Brian Blase points to many of the same problems.

In July 2020, National Public Radio ran a story titled “Another Problem On The Health Horizon: Medicare Is Running Out Of Money.” Yet, the reconciliation bill adds $370 billion to Medicare’s costs over 10 years. For what? The bill would add vision, hearing, and dental coverage, though seniors can already acquire similar coverages through the Medicare Advantage program.

Add to this that the reconciliation bill will likely enjoy support on only one side of the partisan aisle, which raises practical problems, as we’ve seen with the ACA.

Like most healthcare reform proposals of recent decades—Democratic and Republican—this seeks ways to ramp up demand for care without increasing the supply of care that patients will depend upon.

There are only so many doctors in the United States—only so many nurses, and hospital beds, and pieces of lab equipment, and drug patents.

The reconciliation bill offers Americans the means to buy more care without doing much to assure that more care will be available when they go to buy it.

There are myriad ways that we can increase the supply of care. They’re just not in this bill. The rapid development, manufacture, and deployment of mRNA vaccines against COVID-19 is one of medical science’s most remarkable success stories.

Among other things, it required the U.S. Food and Drug Administration to temporarily halt its unnecessary sluggishness in approving new drugs. Doing so created care that was simply not there the year before.

The 50 states have great powers to increase (or decrease) the supply of services, too. Certificate of need (CON) laws in 34 states needlessly limit and delay the addition of hospital beds and equipment. Scope-of-practice laws prevent nonphysician providers (e.g., nurse practitioners) from providing services they’re fully trained to do.

Licensure laws make it difficult for providers to move from one state to another as demand patterns shift—or to provide telemedicine services across state lines—a need that became clear during the pandemic.

Quite a few states have abandoned CON laws, loosened scope-of-practice laws, welcomed out-of-state providers, and opened up telemedicine.

For decades, most of America’s healthcare debate has concerned demand for services— who pays how much for which service, and who is first in line. The real opportunity lies in increasing the supplies of care that patients can access.

Such reform will come not from gigantic once-a-decade Congressional bills, but rather by myriad small changes at the state and federal levels— changes that can be implemented through bipartisan processes, bit-by-bit.

Like most healthcare reform proposals ... this seeks ways to ramp up demand for care without increasing the supply of care that patients will depend upon.