Howard Dean: “Health Care Rationing Body” Won’t Work

In today's Wall Street Journal opinion page, former head of the Democratic National Committee (and former presidential candidate) Howard Dean points out one program in ObamaCare that he doesn't like: the Independent Payment Advisory Board or IPAB.

Don't worry, Dean spends at least four paragraphs preemptively explaining that he loves ObamaCare, and that his gripe is only with this one part in particular.  He's not the only Democrat who feels that way, by the way, since 22 Democrats have signed on to legislation that would repeal it.  This shouldn't be surprising: After all, the IPAB's main task is to reduce Medicare spending, something Democrats don't usually like (especially if Paul Ryan is involved).

Ironically, as if to prove his point, Howard Dean's plea to stop IPAB shows up in the same edition of the Wall Street Journal that features a front-page article entitled "More Doctors Steer Clear of Medicare."  

Dean writes about IPAB:

One major problem is the so-called Independent Payment Advisory Board. The IPAB is essentially a health-care rationing body. By setting doctor reimbursement rates for Medicare and determining which procedures and drugs will be covered and at what price, the IPAB will be able to stop certain treatments its members do not favor by simply setting rates to levels where no doctor or hospital will perform them.

There does have to be control of costs in our health-care system. However, rate setting—the essential mechanism of the IPAB—has a 40-year track record of failure. What ends up happening in these schemes (which many states including my home state of Vermont have implemented with virtually no long-term effect on costs) is that patients and physicians get aggravated because bureaucrats in either the private or public sector are making medical decisions without knowing the patients. Most important, once again, these kinds of schemes do not control costs. The medical system simply becomes more bureaucratic.

So, rate-setting doesn't work? That's too bad. Third parties are making personal decisions on behalf of people they don't know? Awful. Sounds like Howard Dean is coming dangerously close to waking up to ObamaCare's whole game. If he'd only listen to himself… he'd realize that ObamaCare's biggest mechanisms for expanding coverage rely on market distortions like the rates set by the IPAB.

Medicaid (where about half of ObamaCare's newly insured will be enrolled), is like Medicare in that it relies on a third-party (the government) to set reimbursement rates.  Setting these rates too low results in de facto rationing of health services to enrollees, who sadly have to wait for long periods of time before receiving care (or they could just go to the ER). But ObamaCare, without adjusting Medicaid's below-market rates, blindly expands the program's eligibility (at least in compliant states), doubling down on this broken program.  Both Medicare and Medicaid are huge drivers of cost-shifting in health care (meaning health providers have to charge more to consumers with private insurance to make up for the program's low reimbursement rates). 

If you have private insurance, don't think you're escaping ObamaCare's market distortions.  By telling you what has to be in your insurance policy (and forcing you to buy it with the individual mandate), the government is effectively raising your prices. By telling insurers how much (80 percent) of that money has to go to claims, the government is dictating how insurance companies do business. Insurers will be more like public utilities, with rates effectively determined by government mandates, regulations, taxes, and subsidies.  Did someone say "bureaucratic?" Oh yeah, Howard Dean did.

These attempts at controlling costs simply won't work. I agree with Dean that we need some mechanism for controlling costs, but government rate-regulating won't do it.  You know what will?  Market competition.

Let individuals decide if they want to buy health insurance and what kind. Allow insurers to sell diverse products, including high-deductible, HSA-compatible plans. Foster innovative insurance policies that protect against the high costs associated with a bad diagnosis. Vigilantly prosecute fraud. Infuse consumer choice, local control, and market forces into government insurance programs. How about these ideas for cost control?  No rate setting needed.