Only by expanding government control of health care can we bring down its cost. That's the faulty premise of the various proposals for health reform now being batted around Washington. The claimed cost control depends on politically safe ideas such as preventive care or the adoption of electronic health records. And neither--even according to the Congressional Budget Office--will do much to reduce spending.
If these proposals are implemented and fail to produce savings, government will turn to a less appealing but more familiar tool to cut costs: the regulation of access to drugs and medical services. Medicare is already going down this path. What will be new about government-run health care is the instrument of regulatory control. There will be an omnipotent federal health board. Buried in current reform proposals, this board deserves closer scrutiny.
Our best look at this construct comes from a bill released by the Senate Health, Education, Labor and Pensions (HELP) Committee. The bill calls for a "Medical Advisory Council" to determine what medical products and services are "essential benefits" and those that shouldn't be covered by a public insurance plan.
The Senate Finance Committee turns to a "Federal Health Board" to compare similar medical treatments in order to steer reimbursement to lower-cost options. Senate Finance also proposes a "sustainability commission" charged with finding automatic cuts to Medicare spending that would then pass Congress by a simple up or down vote.
Meanwhile, a draft health-care reform proposal introduced last week in the House of Representatives by the three committees with jurisdiction over health policy set up an independent "advisory committee" that will "recommend a benefit package based on standards set in the law." It also proposes a new "commission" that may, among other things, help develop treatment protocols based on government-directed research.
Congress, of course, can authorize the creation of panels and commissions to provide expert advice to the executive branch. But such bodies are typically advisory, and their advice is free to be rejected or modified by the president. Under the HELP committee's plan, the health board's recommendations would be binding unless Congress acts within a brief period to pass a "joint resolution disapproving such report in its entirety."
President Obama objects when people use the word "rationing" in regards to government-run health care. But rationing is inevitable if we simply expand government control without fixing the way health care is reimbursed so that doctors and patients become sensitive to issues of price and quality.
Like Medicare's recent decisions to curtail the use of virtual colonoscopies, certain wound-healing devices, and even a branded asthma drug, the board's decisions will be one-size-fits-all restrictions. Such restrictions don't respect variation in preferences and disease, which make costly products suitable for some even if they are wasteful when prescribed to everyone.
Moreover, these health boards prove that policy makers know they'll need to ration care but want to absolve themselves of responsibility. Some in Congress and the Obama administration recently tipped their hand on this goal by proposing to make recommendations of the current Medicare Payment Advisory Committee (MedPAC) legally binding rather than mere advice to Congress. Any new health board's mission will also expand over time, just as MedPAC's mandate grew to encompass medical practice issues not envisioned when it was created.
The idea of an omnipotent board that makes unpopular decisions on access and price isn't a new construct. It's a European import. In countries such as France and Germany, layers of bureaucracy like health boards have been specifically engineered to delay the adoption of new medical products and services, thus lowering spending.
In France, assessment of medical products is done by the Committee for the Evaluation of Medicines. Reimbursement rates are set by the National Union of Sickness Insurance Funds, a group that also negotiates pay to doctors.
In Germany, the Federal Joint Committee regulates reimbursement and restrictions on prescribing, while the Institute for Quality and Efficiency in Healthcare does formal cost-effectiveness analysis. The Social Insurance Organization, technically a part of the Federal Joint Committee, is in charge of setting prices through a defined formula that monitors doctors' prescribing behavior and sets their practice budgets. In the past 12 months, the 15 medical products and services that cleared this process spent an average 35 months under review. (The shortest review was 19 months, the longest 51.)
In short, other countries where government plays a large role in health care aren't shy about rationing. Mr. Obama's budget director has acknowledged that rationing reduces costs. Peter Orszag told Congress last year when he headed the Congressional Budget Office that spending can be "moderated" if "diffusion of existing costly services were slowed."
Medicare can already be painstakingly slow. Appealing to it takes patients an average 21 months according to a 2003 Government Accountability Office report (17 months involve administrative processing). Layers of commissions and health boards would delay access still further.
When asked to judge the constitutionality of the Senate HELP committee proposal, there's a reason why the nonpartisan Congressional Research Service said that the proposed Medical Advisory Council "raises potentially significant constitutional concerns." Our Founders thought politicians should be accountable when it comes to citizens' right to life, liberty and the pursuit of heart surgery.
Scott Gottlieb, M.D., is a resident fellow at AEI.