Home > Health care, The Noise Machine > ‘Skin in the game’ cannot reduce US health spending

‘Skin in the game’ cannot reduce US health spending

GOP Rep. Paul Ryan’s mendacious proposal to end Medicare and Medicaid as we know them enshrines bad policy, but it is a foundation built on sand: the notion that the free market can reduce health care costs.

As the blog of an ER physician points out, “people who believe that passing along the cost of health care to consumers will promote cost savings are wrong, and health reforms which are predicated on this concept will not work.”

Doc Shadowfax explains by referencing a powerful graphic drawn from a Kaiser Family Foundation report: 20% of the US population accounts for 80% of annual health-care spending, with the worst-off 5% tallying 49% all by itself. Meanwhile, the relatively healthy 50% of the population is responsible for only 3% of spending. Says the doc:

Once you are told that you need a bypass/chemo/stent/dialysis/NICU etc, etc, etc, the costs are so overwhelming that a consumer cannot possibly pay them out of pocket. Since, by definition, these catastrophic costs are paid by some form of insurance, the consumer cannot have much financial interest in cost containment.

On the other hand, no matter how informed and price-sensitive the healthy half may be, they can only affect a very small piece of total health-care spending. Even when they become sick, there’s little they can do, as shadowfax explains in recounting the choices he and his wife are making regarding treatment for her stage II breast cancer.

I can afford to pay $20,000 or more out of pocket if I need to, and it STILL wouldn’t make a difference. If families with more limited means were obligated to pay the same $10-20K, if would mean financial ruin, or inability to access the lifesaving care, but it wouldn’t allow the invisible hand to guide the market towards cheaper, more efficient care.

Read the whole thing…it establishes the fraudulence of the Ryan proposal beyond a doubt. The charts it references are worth the price of admission. H/t The Incidental Economist and Kaiser Family Foundation.

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