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Observation: The Impact of Health Reform: A Few Things We Don’t Know March 2010

The Impact of Health Reform: A Few Things We Don’t Know

By Robert B. Ward
Deputy Director/Director of Fiscal Studies, the Rockefeller Institute of Government

Robert B. Ward

There are three little words we don’t hear enough in debates over health care and other major issues of public policy. Those words are: I don’t know.



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Robert B. Ward is deputy director of the Rockefeller Institute, where he heads research on state and local finances. He is the author of New York State Government, published by the Institute in 2002 and revised in 2006. An earlier version of this commentary was broadcast on WAMC Northeast Public Radio.

Certainly when the topic is the new federal health-care legislation, there are all kinds of questions for which “I don’t know” is the only answer that President Obama, or the Democratic and Republican leaders in Congress, or anyone else can honestly provide.

How will the new federal law affect people who already have coverage? Over time, there clearly will be changes in the overall health-insurance market as a result of the law. You simply can’t bring tens of millions of new customers into the market without having some major impact. What those changes will be, no one can predict with any certainty.

How much will the expanded coverage provided by the new law ultimately cost the federal, state and local governments? No one really knows that, either. The Congressional Budget Office says the health-reform legislation will save money over the coming 10 years. But that’s because the new taxes that are part of the plan take effect several years before the expanded coverage provided by the law takes effect. Once the new revenues and new costs are all in place, there is at least some likelihood that the new law will produce larger deficits in Washington than would have developed otherwise. How much larger? No one knows.

How will the new federal law affect New York and other states across the country? Hard to tell. In the short run, it may allow coverage for more of the uninsured with little additional impact on state budgets that are already strained to the breaking point. Over the long run, it’s likely that the new law will add significantly to state budget problems — simply because the growth of health-care costs is likely to be sharper than the economic growth that drives increases in state revenues.

How will more widespread use of electronic medical records change health care? The explosive growth of digital information in recent decades has led to enormous gains in cost-efficiency and consumer satisfaction — helping to explain the rise of Walmart, for example. Analysts of varied perspectives predict similar benefits for the nation’s sprawling health-care system. Electronic records also raise concerns about privacy issues, given problems experienced by many credit-card users, for example. The standards that are developed for such records will go a long way toward determining both gains and potential risks for consumers. For now, solid predictions regarding such results are difficult, at best.

Prohibiting insurers from denying coverage because of pre-existing conditions may have many effects, including some that involve rapidly evolving technologies. Such prohibitions may, for example, reduce the risks to people who get genetic tests, which in turn may eventually improve preventive care and lead to better tailoring of drugs and other therapies. Could such outcomes help significantly with the elusive goal of bending the cost curve downward? Only time will tell.

One reason that “I don’t know” is the right answer to so many of these questions is that the nature of health care, and the cost of health care, are simply very hard to predict. In New York, Governor Nelson Rockefeller convinced the Legislature to create a state Medicaid program in 1966. Governor Rockefeller predicted the program would save the state millions of dollars by substituting federal aid for funding that had been based on the state’s own tax revenues. But within two years, Rocky was announcing that Medicaid costs were higher than expected, and asking the Legislature for changes to reduce costs. We’ve gone through that cycle, with expansions of coverage followed by higher-than-expected increases in costs, a number of times since then.

Health-care costs keep rising sharply in part because we expect better care every year, and to a large extent we get it. Or, put it this way: Every year, new treatments and new technologies are invented. And as soon as they are brought to market, we all expect that we’re entitled to them. People used to save their dollars to pay for a new pair of eyeglasses, and would pay the doctor’s bill out of their savings account. Many of the treatments we take for granted today simply did not exist, so there was no need for anyone to pay the bill. Now, we’re blessed to have available expensive treatments for cancer and HIV, incredible diagnostic equipment such as MRI machines and CAT scans, and other medical advances. We assume someone will pay for these things. And yes, someone will — we will, in our health insurance premiums and our taxes.

Tomorrow, someone will patent a new health-care technology, or another new lifesaving drug. It will have cost a lot of money to develop. It will be expensive. We will assume that we’re entitled to it, and someone should pay for it. Again, someone will pay for it. We will, in one way or another.

Unavoidably, that’s the nature of health care. It’s wonderful that we continually have new forms of treatment available. We can safely predict that such progress will continue. And fortunately we’re a wealthy nation that, so far at least, can afford to pay for ever-improving forms of health care for more and more people. That’s a good thing.

It leads to another question: Is there a significant risk that, at some point, the continual growth in health-care costs will outpace our ability to afford it? The answer to that is, absolutely. And do we have a good idea how far in the future that time might be? The honest answer to that is three little words: We don’t know.


ABOUT THE ROCKEFELLER INSTITUTE OF GOVERNMENT

The Nelson A. Rockefeller Institute of Government, the public policy research arm of the State University of New York, conducts fiscal and programmatic research on American state and local governments. It works closely with federal, state, and local government agencies nationally and in New York, and draws on the State University’s rich intellectual resources and on networks of public policy academic experts throughout the country.