A Long-Term View of Health Reform

Source: Richard P. Nathan, Nelson A. Rockefeller Institute of Government, Rockefeller Institute Brief, June 2012

In his third brief on the fiscal challenge caused by rising health costs, Nathan examines how markets operate in our health system. He focuses on ideas that seek to empower consumers — and calls for combining them with what are often seen as opposing approaches based on provider value…

This paper focuses on the fiscal challenge to America’s governments of rising health care costs. Based on a review of the literature and an analysis of current policies and programs, the paper argues that three types of reforms are needed: (1) strengthen market incentives, (2) place greater emphasis on income- testing, and (3) give priority to meeting catastrophic health care needs. The paper describes theories of management change and the activities of health insurance exchanges. It considers the role of the federal tax exclusion for employer contributions for employee health benefits in relation to the controversy about whether benefits should be provided on a defined-contribution (fiscally closed-ended) basis or a more open-ended defined-benefit basis (that guarantees a basket of health services). The aim of the paper is to provide an in-depth substantive and institutional explanation of changes that could be made consistent with the three types of reforms listed above by converting Medicare (the biggest source of cost pressures) to a defined-contribution (premiumsupport) program with stronger income testing, revising the Affordable Care Act, and establishing a course-correction system for making and implementing policy changes that enables the president and the Congress to adjust to new developments and changed conditions in the implementation of new policies.

Leave a Reply