If we want to provide more cost-effective care to poor people, we should proceed in the same way that we should proceed in other parts of the medical economy. We must do the hard work of improving the quality and economy of care provided to the concentrated group of extremely costly patients. There is no short cut. Under any financing system, this requires the hard work of clinical-care coordination, quality improvement and social services to address life circumstances that undermine health.
Pointer from Tyler Cowen. His main statistical argument is that a small percentage of Medicaid patients account for much of the spending. It is likely that these are patients in nursing homes.
However, this does not answer the question of where there are opportunities to save money in medical care. Some possibilities.
1. Death panels. To the extent that late-stage treatments are wasteful, you have to change the decision-making process. Families and would-be heroic doctors need to have less influence.
2. Reducing procedures, such as back surgery, with high costs and low benefits. In Crisis of Abundance, I argued that there is in fact a large “gray area” of medicine, in which procedures are neither absolutely necessary nor absolutely unnecessary. This is counterintuitive, and if you do not believe it, then you end up siding with Pollack. If you do believe it, then having patients pay more of the cost of treatment could be a big deal.
3. Improving management in health care, particularly of patients with complex illnesses. My guess is that if there are big savings to be had here, they come from reducing the status of doctors relative to managers, social workers, and care-givers with lesser credentials. See Does the Doctor Need a Boss? I would not bet that government will be successful at re-engineering the system, and in fact regulation of medical practice is probably a major inhibitor.
4. Innovation in treatment. My concern would be with the Food and Drug Administration. They want to err on the side of keeping treatments off the market. We might be better off if their task was shifted to funding and publicizing research, not actually regulating.
Having patients pay more can’t work as long as costs are hidden and unknown until long after treatment if even then. It is trying to force use of a market that doesn’t exist. So much policy is backwards in this sense.
Having patients pay more might encourage more price transparency. It would also likely lower patient volume, which, if you agree with Robin Hanson that ~50% of healthcare expenditures are either wasteful or actively harmful, should be taken as a positive.
#1 suffers from an insurmountable information insufficiency. I saw it first hand – a realtive was very ill, but literally no one actually knew why. By the time they figured it out, several days and huge dollars had been spent. None of it was in any sense ‘heroic’. And the person in question was ready to die, was in fact praying to die. But for all sorts of deep reasons we do not and cannot let people die when there’s a very good chance all they have is something like an ulcer that can be fixed with a relatively minor procedure. People seem to have this impression that huge dollars are spent on Uncle Joe who everybody knows is dying of specific cancer type C247 and anything beyond pallative care is a waste. I’m sure that happens, but cases where it’s not all clear what is actually going on are also likely very common and a huge source of cost.