Henry Aaron
About
Senior fellow at the Brookings Institution; health economics scholar and author of the critique editorial
Claims by Henry Aaron (19)
The US has an extraordinarily complex, non-standardized set of arrangements for paying for health care, where physicians and hospitals must handle many different billing forms and keep records to justify bills, making administration more expensive than any social benefit it generates.
There is enormous geographic variation (up to eight, nine, ten to one) in the frequency of certain medical procedures across US areas that cannot be justified by variations in epidemiology, and higher procedure rates do not necessarily produce better health outcomes (e.g., coronary bypass and angioplasty).
Even if administrative differences between the US and Canada are real and large, they tell policymakers little, because reform inevitably evolves gradually from current arrangements over decades, while real health spending rises about 5% a year and doubles roughly every 15 years—so any administrative savings would be a small, hard-to-isolate fraction of total spending change.
Health care differs from other industries because the goal of policy is to protect individuals from financial ruin in the event of serious illness; once nearly everyone has such insurance, the price mechanism is short-circuited, leaving only second- or third-best methods of limiting spending and weak incentives for uniformity.
Billing non-standardization persists largely because no single payer has a strong incentive to abandon its own forms and adopt another's, and there is a legitimate role for the public sector to establish uniformity where it is efficient—as was done with telecommunications and standard railroad gauges.
The Veterans Health Administration—a government-run organization resembling the British NHS—was transformed over about 15 years after Congress improved incentives and gave administrators more flexibility, and can now be argued to be the most cost-effective health delivery system within the 50 US states.
US out-of-pocket health spending as a share has not only fallen greatly but is now lower than in most other developed nations, because although other countries have complete coverage of major expenses, their total cost-sharing is actually larger than in the US (per Jason Furman's Hamilton Project paper).
Because there is an entrenched ideological division in the US and no single approach commands majority support, the federal government should encourage states to experiment with a wide range of reform approaches (as Massachusetts did under Romney), so the country can learn what works—an explicitly bipartisan, federalist strategy.
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