THE BLOG
06/28/2009 08:38 pm ET Updated May 25, 2011

How To Fix Health -- Use Less

No health reform plan will succeed unless it cuts consumption.

Today's debate, with its focus on refighting old wars and settling old scores, is straying from this focus. There's very broad agreement that our national health bill is becoming unaffordable. So unless we cut costs for those now insured we won't be able to extend coverage to the uninsured.

Administrative reforms won't do the trick. Paying providers less via a government plan that sets low prices won't work either. Past efforts to do so have seen volume expand to more than compensate for the loss of income. Ultimately, the system must provide fewer services.

That doesn't mean the sick will be denied what they need. In an environment where an estimated 30% of spending - including a large number of unneeded tests and procedures as well as some bloated administrative expenses - is wasted, everyone can be provided with what's necessary.

Some call that rationing, but that's simplistic and misleading. Any environment where everyone can't have anything anytime involves choices and priorities. That's what life is all about. So far, no society has been able to overcome this constraint and there's no reason to believe anyone will anytime soon.

Too many are now invested in a series of side debates irrelevant to this central issue. The existence of a public plan won't cut consumption unless it includes limits on services like those now imposed by Medicare and once used by private firms during the managed care effort. A public plan isn't a prerequisite for imposing such limits.

Changing the tax status of employer-provided insurance won't make much difference either. If four-fifths of our health bill is run up by the one fifth among us who are very sick, changing the behavior of those who are well will have a marginal impact at best. And asking those who are sick to shop in a dysfunctional market that lacks reliable signals about price or quality makes little sense.

America could simply decide that health is a top priority and make a commitment to spend whatever it takes to provide universal insurance, but there's little sentiment for moving in that direction. State after state has pulled back from Medicaid expansions in response to budget pressures. The electorate is not willing to write a blank check and our political leaders are reluctant to try to lead in that direction.

We're now witnessing a political two-step where there's a hope that the extra expense of covering the uninsured in the short run will be largely offset by greater long-run efficiencies in a reformed system. In terms of expense, phase one is a certainty and phase two, the reformed system, is a theory.

Turning that theory into practice won't be easy and may not be possible unless there's an acknowledgement at the outset about the need to reduce consumption.