Wednesday, June 9, 2010

More Thoughts On Dartmouth

See "Why The Dartmouth Flap Matters For Obamacare" for background.

John Goodman has an excellent piece out today on the Dartmouth fracas. He makes a compelling analogy between efforts to improve healthcare quality by government fiat and those who have tried to reform the public education system:
Now for 25 years, education policy experts have been asking this simple question: Is there a way for the funders of care (the buyer side of the market) to get low-performing schools to produce as well as the high-performing schools? In other words, can we use the power of the purse, the power of authority or any other governmental power to replicate excellence?

The answer appears to be: No. Every example we have of a good school is an example of excellence achieved because of the enthusiasm, energy, leadership, vision, etc. of people on the supply side of the market. We have no examples of good schools created by federal judges, school boards, city governments, state governments, etc. (unless you count magnet schools that siphon off all the best students).

The same thing is true in health.
He also points to a provocative NCPA study by Andrew Rettenmaier and Thomas Saving, who show that unusually high regional spending by Medicare is often offset by unusually low spending by private insurers or Medicaid:
News stories often imply that doctors in high-spending Medicare states are practicing medicine in a way different from doctors in low-spending states. One is left to infer that this must also be true for Medicaid patients and private patients as well. But this inference is not entirely true.

For example, although Louisiana is the highest spending Medicare state and South Dakota is the lowest, average per capita health care spending for the whole population is actually lower in Louisiana ($5,040) than it is in South Dakota ($5,327). This is not an isolated case:
  • Although Texas is fifth highest in Medicare spending per capita, it is 43rd in per capita spending for the state's entire population.
  • California is 11th in Medicare spending, but 42nd overall.
  • North Dakota is 43rd for Medicare, but 11th overall.
It appears that high Medicare spending is often associated with lower spending on the non-Medicare/Medicaid population and vice-versa. This observation is consistent with cost shifting between public and private payers, although there may be other explanations as well.
The whole thing is worth a read.

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