As you correctly point out, the major interests are going to protect their turf. When this comes up, I think mostly of hospital administrators – mostly (nominal) Not-for-Profits who none-the-less pursue “Utility Maximization” (so says my text book) and the “5 P’s”: Increased Pay, Perquisites, Power, Prestige and Patronage (I live in Metro-Boston. See: Mass General Hospital.)

The ONLY decent explanation I have ever laid eyes on when it comes to healthcare inflation is Baumol’s “Cost Disease” theory, which explains the increase in cost in real terms as a function of the absence of productivity improvements inherent in the hands-on nature of a physician delivering care. Sure, there’s technology, drugs, etc. driving up costs There’s also fee-for-service reimbursement that creates incentives for over-billing. And the red herring of malpractice suits (a real hassle for a narrow band of care givers – not an overall economic driver as is often incorrectly stated.) Etc. etc.

Anyway: the point I would make is that all of this talk of cost reductions (via improved IT, reducing “waste, fraud & abuse”) is nonsense. It’s always going to come down to a matter of who controls the transaction. Right now, the most important decision makers are the hospital, drug and insurance execs who sign the deals. What could the federal government possibly do that would lead to price disclosure and self-policing by care givers? The Massachusetts “solution” worked (initially) because every interest had a belly at the table. But there is still no cost control, inflation remains rampant, and cuts are already being made. I think it’s going to crash, just like Tennessee’s program did in the 90’s. Massachusetts is not unique, nor the first to try, nor the smartest. At the moment, policy makers here have strained elbows from slapping themselves on the back. But the chickens are going to come home to roost. God help the country if it thinks we’re a model.

Thanks for reading!