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Have We Won the Empirical Debate About Economic Policy

The Independent Payment Authorization Board

Earlier this week Robert Pear of the New York Times wrote an article about the Independent Payment Authorization Board--the IPAB--that included absolutely no information about how the IPAB would work, why so many people that it was a very good idea, or why it had made its way into the Affordable Care Act in the first place. It was the kind of context- and substance-free article that the Robert Pear I knew in the early 1990s when I was in the Treasury would simply never have written.

Today Paul Krugman adds some of the missing pieces back in:

Patients Are Not Consumers: Earlier this week, The Times reported on Congressional backlash against the Independent Payment Advisory Board.... This backlash was predictable; it is also profoundly irresponsible.... We have to do something about health care costs, which means that we have to find a way to start saying no. In particular, given continuing medical innovation, we can’t maintain a system in which Medicare essentially pays for anything a doctor recommends. And that’s especially true when that blank-check approach is combined with a system that gives doctors and hospitals — who aren’t saints — a strong financial incentive to engage in excessive care. Hence the advisory board.... The board, composed of health-care experts, would be given a target rate of growth in Medicare spending. To keep spending at or below this target, the board would submit “fast-track” recommendations for cost control that would go into effect automatically unless overruled by Congress.

Before you start yelling about “rationing” and “death panels,” bear in mind that we’re not talking about limits on what health care you’re allowed to buy with your own (or your insurance company’s) money. We’re talking only about what will be paid for with taxpayers’ money....

Now, what House Republicans propose is that the government... replace Medicare with [less spending in the form of] vouchers that can be applied to private insurance, and that we count on seniors and insurance companies to work it out... [through] the wonders of “consumer choice.”

What’s wrong with this idea (aside from the grossly inadequate value of the proposed vouchers)?... “Consumer-based” medicine has been a bust everywhere it has been tried.... Medicare Advantage... originally called Medicare + Choice, was supposed to save money; it ended up costing substantially more than traditional Medicare. America has the most “consumer-driven” health care system in the advanced world. It also has by far the highest costs yet provides a quality of care no better than far cheaper systems in other countries....

Medical care, after all, is an area in which crucial decisions — life and death decisions — must be made. Yet making such decisions intelligently requires a vast amount of specialized knowledge... the patient is incapacitated, under severe stress, or needs action immediately, with no time for discussion, let alone comparison shopping. That’s why we have medical ethics. That’s why doctors have traditionally both been viewed as something special and been expected to behave according to higher standards than the average professional...