About the Author

James C. Capretta

James C. Capretta

New Atlantis Contributing Editor James C. Capretta is an expert on health care and entitlement policy, with years of experience in both the executive and legislative branches of government. E-mail: jcapretta@aei.org.


James C. Capretta’s Latest New Atlantis Articles

 Health Care with a Conscience” (Fall 2008) 

 Health Care 2008: A Political Primer” (Spring 2008) 

 The Clipboard of the Future” (Winter 2008)


 More on James C. Capretta

Text Patterns - by Alan JacobsFuturisms - Critiquing the project to reengineer humanity

Wednesday, August 11, 2010

USA Today Op-Ed: Think Health Reform Will Cut Costs? Think Again. 

I have an op-ed in USA Today on the effect of health care reform on costs:

A big reason the new law is ineffective in constraining costs is that it doesn't fundamentally reform Medicare, particularly the program's dominant "fee-for-service" reimbursement option.

That model covers over 75% of Medicare enrollees, or about 35 million people. It works exactly how it sounds: Medicare pays health care providers a pre-set amount for each service. Patients are largely shielded from costs of additional services because nearly 90% have extra insurance that covers costs Medicare doesn't.

This setup creates perverse incentives. Physicians, hospitals and clinics can make more money by providing extra treatments even if they don't improve patient health. Enrollees have little reason to refuse extra care because they pay no additional costs.

Not surprisingly, that's exactly what has happened. According to the CBO, the average Medicare beneficiary used 40% more physician services in 2005 than in 1997. Similarly, physician use of medical tests increased 40% from 2002 to 2007, according to the Medicare Payment Advisory Commission. Needless to say, Medicare spending has exploded.

The full piece is available here.

posted by James C. Capretta | 6:13 pm
Tags: health care costs
File As: Health Care