If the costs are tied to GDP then if GDP falls or is static, the costs must be cut further, right?

At one time lots of people though housing could only rise. Many probably think that GDP can only rise.

Consider a future where GDP falls because we don't have any bubbles left to increase the GDP. Or where it stays static. Besides that, GDP is (can be, usually is) a somewhat phony number when the global economy is rebalancing quickly.

US healthcare needs a more stable and fair anchor than GDP. Ron Wyden isn't quite as honest about how things could work out as is suggested.

Ultimately, cost controls have to be on the providers (including drug companies), because that's where the costs are.

Most of the data seems to indicate the majority of waste on the supply side, some on the demand side, but certainly more easily controlled by providers. The proliferation of care seems to be directly correlated with the proliferation of doctors, hospital beds etc. Patients certainly have demands, but in a more rigorous system, providers would be empowered (hopefully) and incentivized to say no more often.

I disagree with your thesis though on its face. The Wyden-Bennett plan is unpopular with liberals (and probably won't ever make it to a vote) because it dismantles a popular system. People like their employer-purchased health care, and those people voted for Obama and co. It's too honest yes, but too drastic as well. Even though I agree that I think it's the best plan we've got.

Great, great post.

A couple of things to sharpen a few points:

-- You spent a paragraph or two talking about the mechanisms of cost increases in Wyden-Bennett, but your real issue there seems to be with the rate of growth. This isn't really a feature of Wyden-Bennett per se, the rate of growth is clearly a point of negotiation. Similarly, a single-payer system could choose a similar rate of growth. So it isn't really a point of W-B vs. single payer.

-- In reality, both W-B and single payer impose a budget. Single-payer is a hard cap, where as W-B is a soft cap-- tax deductions stop, but you can purchase health care at a non-tax advantaged rates higher than that budget. The choice to do so, thereby allowing individuals to have variable levels of health care consumption (but all covered at a minimal level) is an advantage of W-B over a single-payer plan. (As I've stated previously, there isn't really a single-payer plus supplemental coverage model in reality. France is cited as one, but their supplemental coverage is co-pay reinsurance, dental and cosmetic procedures.)

-- I think the "liberals want physician control, conservatives want patient control" is a little off. There have been market oriented "physician control" options-- capitation in the 90's, example. And patients could similarly choose a plan in the future that leaves the reallocation decisions in the hands of their doctors because of a capitation-like reimbursement model associated with their plan. Capitation will control costs, so these types of plans can survive and be attractive in a Wyden/consumer-oriented plan if that is what patients want. The risk does not have to be the patients in a consumer-oriented model. But the point is patients don't want their doctors to have a reason to not provide them care-- and that's an issue whether its a public or private plan. The bigger fallacy is thinking that the "liberal" approach of "physicians make the tough decisions" approach is palatable, rather than learning some of the lessons from the 90's. Again, cost control is harder than they think.

Thanks for the typically informative post.

At a townhall meeting this weekend I asked Dr. Richard Kronick, of UCSD, whether and by how much the proposed consensus Democratic plan would reduce costs and he basically said the same thing you wrote: A little, but not much.

Now I'm a newbie when it comes to the intricacies of health policy, so could you clear up for me why it wouldn't? Covering the uninsured, instituting comparative effectiveness reviews, health IT, all of these things taken together would put a dent in costs right? What drivers of cost is the consensus plan failing to address?

No. No. No,yet agains.

According to independent analysis by Commonwealth Fund/Lewin Group:

http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=777197

Wyden-Bennett does NOT control total costs, if by total costs one actually means the cost to the U.S. economy as health as a %-GNP. It only controls federal government costs, which is why it is such a darling in congress and inside the beltway pundits.

But total costs explode.

And costs to individuals and families goes up.

And costs to employers goes up.

And costs to states and local jurisdictions goes up.

Wyden-Bennett is good for Congress. Not so good for America.

Why is the the current US health care system so expensive compared to dozens of other nations while delivering worse outcome than those other nation's systems. Why the resistance to adopting the lower cost, better performing systems used by such nations as Switzerland, which costs less yet works much like our current system based on employer provided insurance?

Our current system rations the care that prevents serious illness, such as diabetes care, while spending almost unlimited money even for those with no money on attempts to repair the damage done by this rationing.

Clearly no one opposed to comprehensive universal health insurance have ever heard and understood the advice: "a stitch in time saves nine."

And would it be so terrible to ration care to the people certain to die. Why does it make sense to spend $50,000 to extend the life of an old person with dementia and rapidly declining health? Wouldn't that money be better spent on dental care for 500 kids which would eliminate some need for oral surgery in a few years from decay. Studies link increased heart disease to poor dental health.

I don't think individuals make bad decisions, like eating poorly or failing to take insulin or anti-psychotics or failing to get pap-smears because they know they will get free very expensive sick care if they have a heart attack, lose their vision or limb, or get cancer. I think such care is rationed because of a lack of money to pay for something many do not want anyway. Most people seek care only when needed or advised to obtain affordable preventative care.

It sounds to me like the plan would be little better than what we have now. There are already limits to how much money goes into the health care system- how much uninsured individuals can pay, and how much insurance pays out. When people can't pay those amounts, they simply go bankrupt, or don't get care. This has done nothing to drive down prices. Singapore, as I just learned, actually has a plan similar to this, but it also includes price controls on suppliers of health care. Without that, this plan is just a piece of fantasy based on the idea that the magic markets will reduce prices. They won't, any more than they did on housing prices during the housing bubble, or any more than they would on water for people dying of thirst in a desert.

I get the impression from Sen. Wyden's web site that he believes insurers would find it necessary to compete on cost under the new rules of the game imposed by W-B, and they would do so by promoting wellness programs -- that is, lifestyle changes -- among their enrollees. For me, that's a stretch. It would require an entirely new way of thinking for these companies, a new corporate culture. I think it's equally likely they would take the tried-and-true course, find new and subtle ways to cherry-pick, and/or find new and subtle ways to divide the market among themselves to avoid competing. I'd be much happier with W-B if it included a public option to "keep the companies honest." I say that because I believe the only way to bring TOTAL health costs down is to control costs on both the supply side and the demand side.

"...The system has to figure out how to live on that amount of money..."

And this is the flaw in your reasoning (IMO). Because my down to earth experience over all my years on this great planet are that when you have this equation, what happens is that the services are then fudged downwards so that as much profit can be squeezed out of the value allotted and what is given.