By Evan Falchuk

Giving people “incentives” to spend their money wisely is a growing part of the solution to rising health care costs.  Give people financial responsibility for their health care decisions, the thinking goes, and they’ll make cost-effective choices.

It’s usually done by having people pay part of the cost of their employer-provided health coverage, and through things like higher deductibles and co-pays.  Today, on average, people in the private sector pay 20% or more of the cost of their coverage.  The trend is for this number to go up.

But it’s not true everywhere.

If you look in the public sector you see a different, more troubling story.  It’s a lesson in what can happen when incentives go wrong in health care.  Take New Jersey, for example.  There is a massive controversy there as the governor seeks to close an enormous budget deficit, and is proposing cuts to a wide array of state and local services.  One of the most contentious issues has to do with health care.  The governor wants state employees to pay 1.5% — that’s right, one and a half percent – of the cost of their health coverage.  Today, most state employees pay none of the cost.  This change would, by some accounts, save the state hundreds of millions of dollars a year.

Another example is here in my home state of Massachusetts.

Like New Jersey, Massachusetts faces serious problems with the cost of health care for employees of local government.  And, like New Jersey, city and town employees pay much less than their counterparts working in the private sector.  The results are very similar.

While average family health care premiums in the United States are about $13,000 a year, employees in the city of Framingham, Massachusetts can enroll in a plan that costs more than $40,000.  Numerous towns have family plans that cost over $30,000, and many others have plans that cost over $20,000.  It’s putting a great deal of pressure on spending by city and state governments.

I saw a similar story unfolding in Michigan.  I testified at the state legislature last fall at a hearing where the state was trying to grapple with this same issue.  A number of witnesses responsible for the cost of coverage at the local level apparently just didn’t have information about how much they spend on health coverage.  It was clear, however, that the number was very, very high.

So what does this tell you?  Incentives mean something in health coverage.  If no one is exposed to the actual cost of health care, it gets overused, or benefits become too rich.  It’s something to think about the next time you hear about a state or local government trying to cut its budget and taking away things that are important to you.

By Evan Falchuk

Today the Commonwealth Fund came out with a chart that it says is a “grim reminder” of what happens when health care doesn’t get reformed.

If only we had listened to Richard Nixon or Jimmy Carter.  We would have saved tens of trillions of dollars in health care spending.

Click to enlarge

Never mind that Nixon and Carter’s big cost savings were supposed to come from price controls.  Which, 4,000 years of history tell us, don’t work. It makes you wonder about that flat line in the alternate universe in which Nixon or Carter got their plans passed.  Beware of charts promising simple descriptions of health care problems.

Still, chart or no chart, it’s a very bad sign for a reform plan when its supporters try to drum up support by linking it to Nixon and Carter.

But the chart does beg another question:  why does the U.S. spend so much more?

There isn’t one answer, just like there’s no unitary health care “system” in the United States.  I’ve written a lot about before, so today I just want to focus on two points.

Other industrialized countries have restrictions on access to care that would be unacceptable to Americans.  We got a tiny taste of what this is like when that group came out earlier this year with a recommendation that women not get mammograms until they were 50.  There was an immediate uproar, and the group ended up re-writing its recommendations.  As an aside, it’s why some people think that a single-payer America would actually spend more on health care, since politicians would never vote for real restrictions on care.

To see what I mean, all you have to do is look at what is happening in state and local governments.  State and local government employees enjoy some of the most generous benefits packages in the country.  As the Boston Globe reported today:

A six-month review by the Globe found that municipal health plans, which cover employees, retirees, and elected officials, provide benefit levels largely unheard of in the private sector. Copays are much lower. Some communities do not force retirees onto Medicare at age 65. Many citizens on elected boards – some after serving as few as six years – receive coverage for life, too.

As medical costs across the board rose over the past decade, municipal health care expenses exploded, draining local budgets and forcing major cuts in services, higher property tax bills, and billions in new debt.

Some cities and towns around Boston are spending close to 20% of their budgets on health care costs.  Some towns spend more than $30,000 per year for family coverage – with almost 90% of that covered by the employer.  Large private employers pay about half that much on average for family coverage, and cover much less of the premium.  And it’s not just happening in Massachusetts.  Governments – for whatever reason – do not have in place the kinds of benefits offerings that have helped slow the growth in health care costs in the private sector.

So of course there should be some kind of reform in America.  But while politicians are arguing about a grab-bag of issues they aren’t grappling with the huge opportunities to improve health care costs right in their own backyards.

By Evan Falchuk

Massachusetts Governor Deval Patrick announced this week he has had enough of rising health care costs.

So he is proposing a novel solution: make them illegal.

Well, it’s not fair to call this idea “novel.”  Governments have tried price controls for 40 centuries.  And even though they don’t work, they keep trying.  The explanation isn’t complicated.  It’s an easy way for a politician to seem to do something about rising prices.  In this case, it won’t do much about the underlying problem, but it is a terrific way for a governor to look like a man of action.

There is a small irony in the governor’s proposal.  It admits that government itself is one of the important reasons health insurance is so expensive.  How?  Mandates.  He says he wants a two-year moratorium on telling insurance companies what new benefits they have to cover in their policies.  Mandates are one of the important reasons why health insurance is so expensive.

But the problems of costs in Massachusetts are about way more than just the mandates.  It’s the market.

In the last 20 years, Massachusetts has become dominated by bigger and bigger insurance companies and bigger and bigger hospital systems.  They’ve been fighting it out with each other — or not — and the result has been that consumers and small businesses are getting a very bad deal.  What’s worse is that it’s happened as the state government leaders of both parties have stood by and watched, or even approved.

How consolidated is the market today?  One company controls about half of the health insurance market, with the rest is split up among 4 smaller insurers.  Likewise for hospitals.  In the Boston area, where most Massachusetts residents live, one hospital system dominates.  The rest is split up among a small number of other, smaller systems.

Now, Governor Patrick’s Attorney General, Martha Coakley said something surprising about all of this last week.

She said the problem isn’t really the insurance companies.  Instead, she says, health care is so expensive in Massachusetts because of the consolidation of hospitals.  She did a study and found that big hospital systems use their leverage to charge insurers more money, which they must pass on to consumers.  Coakley says these are “serious system-wide failings in the commercial health care marketplace which, if unaddressed, imperil access to affordable, quality health care.”

It’s odd that Coakley ran for Senate on a platform devoted to a reform bill that would have done nothing to address the “serious system-wide failings” she identified.  Or maybe it’s not.  The gulf between politicians’ rhetoric about the health care and the reality of how it works shouldn’t be surprising anymore.  But the extent to which the government acts in such disconnected ways explains a lot about how our system could become such a fine mess.

One economist, talking about the failure of price controls over the last 4,000 years said this about their appeal, and their peril:

With the wave of a hand, or the flash of a legislative pen, they promise to make everything cheaper. And for more than four thousand years the results have been exactly the same: shortages, sometimes of catastrophic consequence; deterioration of product quality; the proliferation of black markets on which prices are actually higher and bribery is rampant; destruction of a nation’s productive capacity in the industries where prices are controlled; gross distortions of markets; the creation of oppressive and tyrannical price control bureaucracies; and a dangerous concentration of political power in the hands of the price controllers.

In health care price controls won’t work, and they will do something worse.  They will be yet another way to keep in place the corroding system we live in today, yet another in the line of unfortunate policy choices that have brought us here.

And years from now people will look back and wonder: how did the system ever get this way?

By Evan Falchuk

A friend sent me this interesting graph from the blog of the National Geographic.

You’ll have to click on it to see a bigger version.  It captures a lot of data very elegantly on a single graph–  Professor Tufte would love it.

What it shows is health care spending per person across a group of countries, along with life expectancies, average number of doctor visits per year, and whether a country has a system of universal health coverage.  Although putting all of this data on one graph is novel, the graph makes what by now is one of the oldest political arguments for reform – for all the money they United States spends on health care we don’t get a good deal.

So why blog about this graph?

Because it terrifically illustrates so many of the flawed assumptions about health care that have plagued the reform process.

First, pretty much nothing correlates with anything.

Does spending more lead to longer life expectancies?  It doesn’t look like it – and it’s not just the United States.  Canada spends almost $4,000 per person but gets roughly the same life expectancy Spain which spends about 35% less.  Luxembourg spends one and half times as much as South Korea, but their life expectancies are the same.  Meanwhile, Austrians spend three times as much as Poles, and live longer, too.  Life expectancies do not appear to be a good metric for health care quality.

What about going to the doctor more often?  That doesn’t seem to make much of a difference, either.  Japanese seem to the doctor almost monthly, but live about as long as the Swiss, who go once a year.  Oh, and the Swiss still spend about 70% more than the Japanese on health care.  Australians and New Zealanders go to the doctor about as often as each other, but Australians live longer, and spend about a third more on health care.  It doesn’t seem like rates of doctor visits tell you much about health care quality, either.

So maybe there’s something about having a “universal health coverage provided by public and private insurers.”  Nope.  If  you live in Hungary you’re going to live a decade less than your fellow beneficiary of universal coverage in Sweden.  Even among the countries in the top chunk of life expectancy, their relative spending levels and rates of doctor visits are all over the place.

So what’s going on?

Americans are often criticized for being ignorant of the cultural differences between our country and others.  We are seen as either wrongly assuming that people from other countries think about the world just like we do, or, worse, that we aren’t as enlightened as people living in other countries.  This chart, from an American organization, is fascinating in that it combines seeming ignorance of differences among other countries with ignorance of the United States.

Here’s what I mean.  The division of the world into “red” and “blue” countries, based on the idea of “universal” coverage is simply false.  For example, like the countries themselves, the health care systems of Canada, Britain and Japan are very different from each other.  Yet this graph treats them as if they were essentially the same.

But it’s also incorrect about the United States.  It’s true that the United States doesn’t have a system of “universal coverage provided by public and private insurers,” but the “United States” is the wrong entity to look at.  Health care coverage is mainly a state, not federal question in America.  And if we look at the states, we see a different – and more complicated – picture.

For example, Massachusetts has a system of “universal coverage provided by public and private insurers.”  It enjoys a life expectancy at birth of  80.2 years.  Sounds like one of the “blue” countries.  But Massachusetts spends $7,000 per person per year on health care.  On this chart it would be a puzzling outlier.

Hawaii has an almost universal system, but spends far less than Massachusetts per person.  And yet it has the highest life expectancy in the country.  It, too, would be an outlier.    Meanwhile, “red” New York, where almost 15% of the population is uninsured, ranks sixth in the country in life expectancy and spends about $6,500 per person on health care.  Another outlier.

At a certain point, the existence of almost nothing but outliers ought to make you question your initial assumptions.

Not so with health care.   The story that the United States gets ripped off in its health care spending sticks because it is a convenient oversimplification.  It’s a catchy slogan to advance (or with other slogans, oppose) difficult to understand changes to a complex system.

But the problem with health care in America is we keep getting lured into assumptions that money is the right metric to measure the quality of medical care.  How much we spend, rather than whether patients are getting the right care.  Money, over medicine.

He puzzled and puzzled till his puzzler was sore. Then the Grinch thought of something he hadn’t before! Maybe Christmas, he thought, doesn’t come from a store. Maybe Christmas… perhaps… means a little bit more!

Merry Christmas.

UPDATE: Via Instapundit, Economist Dan Mitchell says the problem is the rise of third party payers for health care.  He includes his own graph that implies that the trouble is people are paying too little out-of-pocket for health care.  In this view, since people spending other people’s money don’t care how much they spend, high US expenses can be explained in this way.  It’s an interesting idea, except that if you look at other countries, like Canada, where the system is almost entirely third-party payer and has been for a long time, costs are far lower than the United States.  And in any case, the people who drive most of our health care costs are spending at levels that far exceed whatever deductibles or co-pays you could ever put on them.  It’s not about out of pocket costs.

If there’s a lesson to be taken from all of this it’s this: beware of charts promising simple explanations for health care costs.

But if you want to look at a chart that shows the biggest drivers of health care costs, try this the one in this post.  The misguided focus on saving money over good medicine means we get neither.  The surest way to save money is to make sure that patients get enough time with their doctors, who need to be able to use their training and judgment to help their patients make the right decisions.  It’s a global problem, but America suffers from the most exaggerated version of it.

UPDATE 2: Jon Peltier does a terrific analysis of the same data with alternative versions of the National Geographic chart.

By Evan Falchuk

Is the health care bill the Senate passed a good thing or a bad thing?

It depends on who you ask. Which ought to be your first clue that it is really an exercise in politics.

I’ve been warning for months that the rushed process and soaring rhetoric veiled the reality of what was happening.  And that is this: no one really can describe what health care reform is about.

There are a lot of reasons for this, but the biggest one is that very few people on either side seem to understand the health care “system.”  In fact, calling it a “system” is part of the problem.  So let me try to help.

Our health care “system” like one of those pictures from an I Spy book.  Here’s one.

The US health care system

What do you see?  There are some coherent things about it.  First, someone put all of those pieces there.  They seem to be set up haphazardly, but they’re actually set up in a way that’s convenient for the publisher of the book.  They also have a general Christmas theme to them.

But that’s about it.

Now, say someone wanted to “reform” this picture.  How would you do it?  You could put everything in some kind of order.  But what order?  Red things on the left, yellow in the middle, blue on the right?  Or the other way around?  Or why not order it by size or shape or type of object?  Why not reform it to make it easier to find the items on that list at the bottom – clear out everything else and just leave behind the thimble, four birds of red, two fuzzy chickens and a gold-trimmed sled?  That would be simple, but it wouldn’t make the game very good.

You could forgive someone who wanted to reform this picture from doing what a lot of people looking at these pictures do – give up and go to sleep.

But would-be health care reformers are cleverer than that.  They decided to change the problem.  Instead of trying to reform the messy health care system, they said let’s reform the health insurance system.  A picture of that looks like a map of the United States.  Now this is a system that can be reformed.

At the federal level it’s a blank slate, so anything you do counts as reform.  And, since we’re in a hurry, you can take a short-cut and just put in place federally something like what the states have been doing for decades.  Presto! Reform.

I poke fun, but what’s so bad about a federalized version of state insurance regulation?

The problem is this: the way states regulate insurance is one of the major reasons why health insurance is so expensive.  Heavily laden with thousands of rules dictating what they have to cover, how much they can charge, who they must accept as insureds, only a few insurers are able to compete.  A cynic might say the rules have become rigged in favor of these few companies.  A kinder person might say that these are the unintended consequences of good intentions.  But whatever the reason the result is the same: a very small number of companies dominate the markets of every state.  Where competition is low, prices are high.

This is the great irony of reform.  The things that have made health insurance so expensive in the states are the very things reformers want to use federally to make it more affordable.

So what do political advocates think about all of this?

Progressives don’t like it because they think it benefits the insurance companies, and they’re probably right.  Conservatives say, no, the insurance companies are getting taken over by the federal government.  They’re probably wrong.  In fact, it’s the machinery of regulation that’s getting taken over by federal government.  And that, should this bill become law, is a bigger deal than most people realize.

By Evan Falchuk

The Healthcare Economist points to a study from late last year about the impact of state insurance regulation on the price of health insurance policies.   It’s a subject I’ve blogged about many times before (like here, and here and here and here).

The study tried to quantify the impact of the types of mandates used by states in their insurance markets: guarantee issue, community rating, mandated benefits, and so-called “any willing provider” rules.

It found that all of these increased the price of health insurance, but there were limitations in the study.  They had a “rich data set based on actual insurance contracts” only for guarantee issue and community rating mandates on individual policies.  Still, this is a big segment of the market – perhaps 30 million people buy insurance in this way – and the data are revealing.

But first, what do these terms mean?

“Guarantee issue” means that an insurance company can’t deny you coverage because of a pre-existing condition.  So if you are sick you can buy a policy and the company has to accept you.  “Community rating” means that an insurer can’t charge you more because you are sick, or because of your age or gender.   Different states put different spins on these concepts, or don’t have them at all.  They typically exist together as part of one regulatory scheme.  They are both part of reform bills in Congress.

According to the study, community rating increased individual premiums by as much as 17%, and family premiums by as much as 33%.  Guarantee issue increased premiums by well over 100% for individuals, and by as much as 191% for families.

Why does this happen?

If the law says insurers have to treat every person the same, without taking into account whether they’re sick or healthy, young or old, a rational insurer will do some rational things.  For example, it will assume disproportionate numbers of people who buy a policy from them will be sick and old.

Of course, when they do this, the product becomes expensive, and young, healthy people start to wonder if they should even buy it in the first place.  After all, they don’t really need insurance, right?  They’re young and healthy and can wait to buy insurance when they get sick.  So, the insurers’ assumptions on the age and health of their portfolios come true, or are worse than expected.  Coupled with the overall rise in the cost of health care, insurers now push through new rounds of price increases, which, in turn, create more uninsured people.  It is a very nasty cycle.

Which brings us to reform, circa 2009.

As Congress debates the politics of reform, there seems to be a lack of recognition of what makes health insurance so expensive in the first place.  The great irony of reform is that lurking in the bills our representatives have written are precisely the kind of regulations that got us here in the first place.

By Evan Falchuk

Blue Cross Blue Shield of Massachusetts and Caritas Christi Health System are announcing a new agreement that some suggest may be a model for the rest of the country.

Under it, the non-profit insurer will stop paying the non-profit hospital on a fee-for-service basis for certain insureds:

Under the deal expected to be announced Friday, Caritas . . . will be paid to take care of about 60,000 Blue Cross members in its new program — whether or not they get sick. Caritas will use some of the payments for preventive services to help keep patients healthy. If Caritas can keep health-care costs under a certain budget, it can make a profit. But if health-care costs go over the agreed-on amount, Caritas is on the hook. . . . . Blue Cross is adding a carrot: If doctors and hospitals can meet certain quality targets, they can earn a bonus of as much as 10% on the value of the deal.

It sounds like a new approach to health costs.  But it reveals more about how the same old ways of controlling health care costs continue to thrive.

Here’s what I mean.

The model of the last few decades has been this.  Insurers and hospitals negotiate rates to pay for care.  The bigger and more important the hospital, the more leverage it has over the insurer.  The bigger and more important the insurer, the more leverage it can have back over the hospital.  So in Massachusetts, like other states, hospitals have consolidated into a small number of big hospital “systems.”  In turn, the health insurance business has become dominated by a small number of insurers, chief among them Blue Cross.

Simplified, here’s how these negotiations go.  The insurer threatens that if it doesn’t get what it wants, it will change its plan designs to make it less likely that patients will seek care at the hospital.  The hospital, says if it it doesn’t get what it wants, it will stop accepting the insurer’s customers.  It’s a game of high-stakes chicken, but deals usually get made.  They typically involve the hospitals agreeing to lower rates of pay for more routine care, and preserving higher rates of pay for more specialized care.  It’s a set up that encourages big hospital systems to get bigger, so they can capture more patients, and more focused on highly specialized care.  It also makes it far more likely that smaller insurers will end up paying more for the same care at the same hospital, as the hospitals try to offset lost revenue from them.

So what does this have to do with the new deal between Blue Cross and Caritas?

Well, less significant hospital systems like Caritas (which has very good doctors but has been notoriously troubled in recent years) have very little negotiating leverage with the big insurance companies.  For them, the game isn’t so much getting a good rate of pay for their services as it is getting patients through the door.  And so they need to figure out ways to get the insurer to encourage patients to go there.  What better way to do it than to enter into a high-profile new contract with the biggest insurer in the state?

Now, take a look at the numbers.  If I’m doing the math right, Caritas is going to get about $6,000 per insured per year.  With state Medicaid payments running at about $5,500 per insured, these Blue Cross patients not particularly interesting, financially.  Unless, that is, the program works as expected and Blue Cross ends up changing its plan design to encourage more people to go to Caritas for care, as opposed to the other major Massachusetts hospital systems.  And you know Blue Cross would love to be able, one day, to use its deal with Caritas as part of its negotiations with those other systems.

“It’s a bet,” said Caritas Chief Executive Ralph de la Torre.

That, it is.  But some new paradigm for health care?  Not so much.

By Evan Falchuk

The strangely out-of-touch comments by proponents of reform legislation continue.

Yesterday, Christina Romer, the head of the President’s Council of Economic Advisers was asked about the proposed excise tax on so-called “Cadillac” health plans.  Romer said:

Part of the idea of how that is going to work is precisely because it does empower consumers. It empowers each of us to have an employer-sponsored plan to call our HR office and say, ‘Would you negotiate harder? Would you think about (whether this) is the most efficient plan out there, because I don’t want my plan paying an excise tax.’ So I think that’s something that is very much empowering consumers.

It’s a bizarre statement.  Roemer has impressive academic credentials, but this kind of statement betrays a profound ignorance of how employers actually buy health benefits.  She’s not the only one with such strange beliefs.

So, let me make it simple.

Companies across America use skilled and experienced benefits professionals to design and implement their health plans.  The bigger the employer the better they are at this.  In fact, big employers are such smart negotiators that they manage to get the services of the insurance companies without paying them a dime for health insurance.  It’s true: they just use the insurance companies to mechanically pay for the cost of their employees’ care, which comes out of the pocket of the employer.

Now, the smaller an employer is, the more difficult it is.  If you’re a company with 20 employees, your problem isn’t whether you are any good at negotiating.  It’s that you probably live in a state where one or two insurance companies dominate the market.  Your choices are limited, and because you’re too small to self-insure, you need to buy insurance from one of them.

But it’s worse than that.  State laws make it so that even if you were to try to “negotiate harder” (whatever that means), there isn’t much the insurance company is allowed to do.

So what is Professor Romer talking about?  Frankly, I have no idea.  So many reform proponents in Washington have never run a business or designed a benefit plan, so I’m becoming less and less surprised when they come to strange conclusions about these things.  But what doesn’t help is that they seem to prefer to spend so much time behind closed doors in Washington, or on TV, and so little time out talking to people actually in this business to see what works and what doesn’t.

This is hubris.  And it bodes very ill for the likelihood that plans coming out of Washington are going to make things better and not worse.

By Evan Falchuk

Health care reformers say they want to improve the quality and affordability of health care.

It sounds good.  But it’s not like there’s no one out there trying to do that.  Employers of all sizes have been working on this problem for a long time, and they’ve come up with a great many interesting successes and failures.

So what’s the problem?

Well, it seems like reformers in Congress are completely uninterested in these things.

Yesterday I had the opportunity to speak to and in front of two very prominent groups.  Without saying who they were, I will say that one is doing some very interesting work with smaller employers, the other focuses solely on very large employers.  Both are at the leading edge of successful efforts to improve health care quality and cost.  Neither has been asked by Congress to share with them what they are doing.

There is, in short, an enormous divide between what reformers in Congress are trying to do and what people who are in the business of health care understand about the reality of this kind of work.

Let me give you two examples.

One group has banded together hundreds of smaller employers – representing tens of thousands of employees – to try to control rising health care costs.   Unlike large employers, small employers can’t self-insure for health care risk, so they have to buy insurance from an insurance company.

You would think that this group could go to the insurance companies and negotiate some kind of a group rate for their members, right?  Well, they can’t – it’s illegal.  The state in which these employers are located has mandated the rates that insurers must charge small employers.  They can’t give a price break, or have the flexibility to create something that would suit these employers.

The only escape for these small employers would be to pool their insurance risk so they could self-insure like the big employers.  But this is a very complicated exercise.  And why should they have to go through this trouble, when all they really want is to negotiate rates with the insurance companies?  It makes little sense.  But you know what’s worse?  As reform moves along in Congress, this kind of thing may become federal law.

Who benefits from this?

Well, on one level the health insurance companies do.  They don’t really need to compete for business, they just charge what the government tells them and collect the money.  It will be the same if a government-run insurer shows up to compete, they will just get to do the same thing.  It’s almost as easy as collecting taxes.

But there’s more to it than this.  It turns out that many insurers in that state are working with small employers on innovative programs that improve the quality and cost of care.  Things like helping employers get their employees to stop smoking, lose weight, control their chronic illnesses and many others.  They’re working with hospitals and physician practices to create changes in how care is delivered, and they’re seeing results.  The trouble is, insurers aren’t able to reflect the impact of this work in the cost they charge to an individual small employer.  Well, it’s trouble if you’re a customer, it’s not so bad if you’re the insurer.

It’s something you see large employers doing all the time.  And since they can self-insure, they get the economic benefit of these programs.  In my series on Real People, Real Reform, I’ve shared a very small taste of what major employers in America are doing.  It’s programs like the ones I’ve just mentioned, and many others, and many of them seem to work.

But when you talk to these large employers, like I did yesterday, there is a sense of disconnectedness over what’s happening in Washington.  Few can explain what the government is up to, exactly, and there is a sense of cynicism that Congress hasn’t spent its time in rooms like the one I was in yesterday.  Why aren’t they talking with large employers about the successes and failures they have had with health care?

It’s enough to make you think reform is more about politics than health care.  Or, to give reformers the benefit of the doubt, maybe they just don’t realize they are heading down a misguided path.  It’s as if the government decided in the 1980s that the best way to reform the telecommunications business would be to mandate lower prices for rotary phones, and wanted to set up a government manufacturer of these phones to create competition for them.  It might have worked, but mostly at locking in place a stagnant and deeply unimaginative status quo.

And this is the larger point.

What’s wrong with health care reform isn’t that people have bad intentions.  It’s the total failure of imagination.  As one reform proponent told me the other day, “we’ve been waiting 16 years to do this.”  Well, the world has changed an awful lot in the last 16 years, and one thing should be clear.  We should spend far less of our time trying to settle old political scores, and far more time listening to people who are actually doing real and meaningful things to improve health care.

There is no more difficult art to acquire than the art of observation. – Dr. William Osler

By Evan Falchuk

Here are a few quick reactions to the House’s passage on Saturday of its health care reform bill.

1. It’s a huge bill, and that’s the problem.

It’s 1,990 pages long, and it’s trying to do an equally massive number of things.  It would create a public health plan;  establish insurance exchanges; federalize much of state insurance regulation; change the ways in which the federal government pays for health care; address issues in medical education; try to deal with fraud and abuse in Medicare; make changes to dental care, hospital price transparency, health care for native Americans, long term care insurance; establish subsidies and taxes for individuals, taxes on pharmaceutical and medical device makers, spending on public health programs; eliminate the anti-trust exemption for health and medical malpractice insurers, and on and on and on.  You can get a taste of the bewildering extent of this legislation by just scrolling through its table of contents.

I’m not sure there’s ever been such a big piece of health care or health insurance legislation ever passed.  I mean, like, ever.  It’s not going to become law, though, since the Senate has yet to pass its own bill and the Senate and House versions will need to (somehow) be reconciled.   And if one of the problems with reform is the public anxiety its complexity creates, this bill won’t help.  Still, it’s a big milestone and should be recognized for that.

2.  The stock market seems to like it.

The stocks of a broad range of health insurance companies were up as much as 3% today.   The market doesn’t seem to think this bill is bad news.  Why?

Maybe the market likes that the House bill brings back the mandates on individuals and employers that will create the bounty of new, paying customers Vice President Biden promised.  Or maybe the market thinks the bill is so complicated it won’t become law, which might also benefit the insurers.  Or maybe when the market closed Friday it expected the final bill to be much worse than it ended up being.  Or maybe health insurance company stocks go up every time the Patriots beat the Dolphins.

What is clear is that the market did not treat the passage of this monumental legislation, designed to completely transform the health insurance industry, to be an especially significant event.

3.  Health care and politics mix badly

Back in July, I warned that abortion would end up being part of the fight over health care reform, and it was.  A bi-partisan group of 240 representatives (20 more than voted for the final bill) voted for an amendment to the House bill dealing with abortion.  The amendment would ban the sale of insurance policies that cover abortion in the government-sponsored exchange that the bill would create.  However you feel about abortion, this is an example of the same old way of regulating health insurance that the states have been doing for generations.  It’s what created such an uncompetitive market for health insurance in the first place.

The states, which until now (perhaps) are the sole regulators of insurance, regulate health insurance by telling insurance companies what they have to cover if they want to sell in their states.  In all, states impose nearly 2,000 mandates on health insurance policies in this way.  Of course, whether something is mandated or not depends on the political clout of the group lobbying for it.  Now, the federal government seems to want to try its hand at this same old approach to regulating insurance.  Abortion, it seems is the first of what promise to be many such mandates.

Don’t believe me?  Take a look at the action in the Senate.  Last week, Senator Hatch proposed that policies sold in the Senate’s version of the exchange be required to cover Christian Science prayer treatments.