Wednesday, October 29, 2008

The Obama Plan: Economists Speak Out on Forbes

Forbes brings us an interesting piece by a pair of research associates at the National Bureau of Economic Research. The topic, unsurprisingly, is health care and the approach taken on the subject by the Democratic nominee for U.S. president.

The first of the pair, David M. Cutler, is the Otto Eckstein professor of applied economics at Harvard's Department of Economics and Kennedy School of Government, and is also an adviser on health care to Barack Obama. I think we can guess what side of the issues he comes down on. The second one, J. Bradford DeLong, is a professor of economics at U.C. Berkeley.

Between the two, they have crafted a exploration of why their chosen candidate is the one who can save the current health care system. I'm just going to point out two ways in which Sen. Obama's plans agree with our own George C. Halvorson's analysis of the current health care crisis.

First, let's take a glance at one of my favorite topics, Electronic Medical Records. Via the Forbes article:

One element of reform is information: Doctors, patients and administrators simply do not know enough about which treatments work and which are ineffective or harmful. An estimated one-third of medical costs go toward care with no value. Obama proposes to jump-start the long-overdue information revolution in health care with $50 billion to computerize the medical system and spread the word about best practice.

If you have any questions on why this is important, I suggest using this blog's internal search function and looking for "electronic medical records." I have written extensively over the past year on the subject from a variety of angles. Let it suffice to say that administrative costs -- the dreaded paperwork that elicits groans from almost everyone -- is one of the areas where spending can most easily be curtailed. To make it a true win-win scenario, doing so will increase efficiency of treatment across the board.

A second element is to fix perverse incentives in medical care. Doctors and hospitals today are paid for performing procedures, not for helping patients. Insurers make money by dumping sick patients, not by keeping people healthy. Obama proposes to base Medicare and Medicaid reimbursements on patient outcomes in a coordinated effort to drive the entire payment system toward paying for improved health rather than just more care.

Perverse incentives is exactly the way Mr. Halvorson puts in in his book, Health Care Reform Now!. There is a vital need to switch from the pay by treatment attitude to results-oriented incentives. With over 9,000 billing codes, there is not one for a cure. That speaks volumes.

The article goes on to cover other health care issues that we return to consistently here: the massive importance of prevention, accessibility of care, affordability of coverage, and more. A very nicely presented piece, and since it is penned by economists, it is of additional interest as we watch the DOW bounce up and down like a rubber ball.

Good reading!

SOURCE: "Obama Can Cure Health Care's Ills" 10/28/08
photo courtesy of bobster1985, used under its Creative Commons license

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