In our RealClear effort to focus on the big questions that need big thinking, Jerry Rogers, editor at RealClearPolicy, presents the following exchange of health policy ideas with James C. Capretta, author and senior fellow at the American Enterprise Institute.
Q. The knock on the free-market health policy community (GOP and Center-Right policy experts) is its lack of a health policy agenda. How would you respond?
A. I will not presume to provide an answer for the entire group referred to in the question, which of course includes people with a diversity of views. Nor would I characterize what I favor as a “free market” in health care, which implies light regulation and minimal government involvement. Although some deregulation is needed, and many existing rules increase costs unnecessarily, the focus needs to be on replacing rules that set aside market incentives entirely with those that will allow the market to function. As I note in the book, an entirely free market is not realistic in health care because of factors that make it difficult for consumers, without the help of regulations, to play the same role they do in other sectors of the economy.
As an alternative, as presented in the book, I argue in favor of building a structured market in the health sector. Structure in this context means putting in place rules that allow consumers to readily see which insurers and providers of medical services are offering the best value for what they charge. An important element is standardization of insurance plans and bundled services that are subject to price transparency requirements. With standardization, consumers could make apples-to-apples price comparisons that are rare in today’s market. The result would be more pressure on insurers to lower their premiums, and on hospitals and physicians to lower the prices they charge for their services.
The kind of structured market discussed in the book needs to be implemented in Medicare, Medicaid, employer coverage, and the individual market to have the desired overall effect on slowing cost growth.
Q. What are the Center-Right’s health care priorities?
A. That is hard to say. It appears that most Republicans have accepted that they are not capable of fully replacing key provisions of the Affordable Care Act (ACA), which means they must offer up reforms that, in effect, change the ACA rather than eliminate it. Overall, however, health care was not a prominent topic among Republicans during the 2022 campaign.
There is an opportunity here for whoever becomes the GOP presidential nominee in 2024 to define for the party where it would go with respect to health care policy. If that person chooses to sidestep questions on health care, it is likely that the GOP will remain largely without a coherent overall plan for another few years.
Q. Where are the areas of possible compromise and action with Democrats? For instance, would making telehealth availability in Medicare permanent be something both parties could support?
A. There are many areas of health care policy that are amenable to bipartisan agreement. Telehealth is certainly one of them. There is widespread acceptance in Congress that greater use of telehealth is something many patients favor, especially those who live in remote rural areas. Further, telehealth is becoming an important component of mental health care. It would not be surprising if, in the end-of-year bill now being negotiated, Congress approves keeping telehealth in Medicare for a couple of additional years beyond the end of the official public health emergency.
Another topic that lends itself to bipartisan compromise is automatic enrollment into health coverage. A large segment of the uninsured population is already eligible for coverage. Instead of creating new programs, the parties should work together to make it easier for uninsured individuals to sign up for coverage that is currently available to them.
Q. We have a serious physician shortage. What can Congress accomplish here? Anything? Allow doctors to practice medicine across state lines? Allow a Board-Certified physician based in NY or Washington state to practice in Wyoming? Tax incentives for basic primary diagnostic specialties? Tort reform? In the states – repeal Certificate-of-Need Laws?
A. In one of the chapters in the book, I offer some suggestions on how to make the supply of physicians in the US more responsive to market realities. The first step is to be more open to accepting and credentialing doctors born and trained outside the US. There is already a sizeable immigrant population working in the US as doctors, but it could be a larger group still if current immigration rules were liberalized to allow the US to benefit from the many thousands of physicians from other countries who would like to move and practice in this country.
Second, the federal government can influence the pipeline for credentialed physicians with the funds it disburses to help finance education and residency programs. Those funds should be tied to rules requiring states to create more regulatory distance between the physicians who benefit from restricted supply and the key decisions which influence how many new doctors will become available each year to care for patients. In other words, physicians should determine the clinical criteria for credentialing members of their profession, but they should not determine the size of the physician labor force.
Q. Should some of the regulatory flexibilities from the Covid-19 public health emergency be made permanent fixtures in the healthcare infrastructure?
A. Yes. The federal government, through the payment rules for Medicare, has layered too many requirements on hospitals, physician practices, and other providers. During the public health emergency, some of those rules were set aside without any obvious negative consequences. Those rules should not be put back into effect unless there is clear evidence that the cost of compliance is less than the benefits that would follow from re-imposing them.
Q. How do we address pharma innovation and drug prices? Can we roll back the pharmaceutical price controls in the Inflation Reduction Act?
A. I cover pricing for prescription drugs in one chapter in the book. The main point is that the pricing of these products must always balance incentives for innovation with ensuring access and affordability for the whole population. The missing piece is a concerted strategy for building consensus around clinical value as the basis for setting prices. If a new product is clearly superior to an existing therapy, the added clinical value to patients should inform the price of the product. New therapies with substantial benefits should be priced accordingly. Those with very little additional value over what already exists should not come with inflated prices.
Q. How do we de-politicize medicine? How does the public-health community win back the trust of the American public? Possible?
A. I believe it is possible and, of course, very much needed. The US underperformed in its response to the COVID-19 pandemic in part because of insufficient preparatory work. Despite many years of discussion about the need to be prepared, the federal government still was not fully ready to act quickly when the danger signs were evident. In particular, the Centers for Disease Control and Prevention (CDC) was far too slow to take action in the early weeks, which set back the entire effort. The Trump administration did not help matters by centralizing decision-making among political officials who wanted to minimize the danger for election-related reasons.
So, the first step should be to reform the CDC to make sure the focus of the agency is on vigilant preparation for pandemics, and on building the operational capacity to act swiftly and decisively. Next, the administration needs to make pandemic response the responsibility of accountable agencies and not ad hoc groups of political officials.
Q. What do you see as possible for getting done in the next Congress?
A. The current Congress has surprised many people with how much significant legislation it passed. The incoming Congress, with the GOP taking control of the House, will be different, but there will still be opportunities to pass meaningful bills. In health care, legislation addressing mental health care, substance abuse, and access in rural areas comes to mind.
Q. What are your thoughts on how to address costs, access, and innovation?
A. The best way to make progress on all fronts is by bringing more cost discipline to the provision of services. And, as the book argues, that can be done by building a structured market for medical care and also for health insurance. Market incentives would reward innovative companies that can deliver better care to patients at lower costs.
Q. How do we make the complex conversational on healthcare reform?
A. That will not be easy. Health care policy is complicated, and efforts that rely on slogans to sway public opinion invariably paper over the tradeoffs that are unavoidable on these questions.
One way to present market-based reforms to the public is to emphasize the potential savings consumers would experience. CBO has estimated that implementation of “premium support” in Medicare, which in a way is a structured market plan, would reduce overall costs by 7 percent. A portion of the savings could be directed to Medicare beneficiaries. The tangible benefits from better incentives might be enough to convince more Americans that a structured market is a viable option for imposing more cost discipline on the health sector.
James C. Capretta is a Contributor at RealClearPolicy, a senior fellow at the American Enterprise Institute, and the author of US Health Policy and Market Reforms: An Introduction (AEI Press 2022).
