The issue of health care costs plays differently in the political arena than the issue of coverage. Politicians bicker endlessly about who should be covered and how generously, as the never-ending debate about the Affordable Care Act has demonstrated. In contrast, there is bipartisan agreement that policy action is needed to address rising medical costs.
That said, addressing costs in a meaningful way is difficult. The central difficulty is that medical spending increases apply to a mix of valuable services and less valuable ones. Spending more for drugs or surgeries that cure disease is worthwhile. But paying more for a medication because a pharmaceutical company has decided that the market will bear the cost is not.
The political arena is hunting for the equivalent of the perfect surgeon, one who can take out the diseased tissue without harming the intertwined vital organ. Sadly, no such policy exists.
The closest we come to the ideal policy is prevention. Disease prevented is both healthier for the individual and less expensive for the system. There have been major successes in prevention, such as new medications for hypertension and high cholesterol that have materially reduced the incidence of chronic cardiovascular disease in the past few decades. There is more to be done here, but prevention has its limits. Obesity accounts for a greater part of medical spending over time, and there are no widespread prevention strategies shown to reduce excessive weight. Furthermore, the risk factors for many high-cost conditions, such as Alzheimer disease and other forms of dementia, are not well understood.
As a result, when attention turns to action, the steps taken will necessarily involve difficult trade-offs. Three approaches that policy makers might take are cutting prices, charging people more in the form of cost sharing, or bundling payments.
To be continued...