Just Fix the Damn Payment System!

Abstract

This piece takes as a given that we are stuck with our fragmented, inefficient, multi-payor health care system for at least the short run. It then analyzes the deficiencies of three payment mechanisms whereby regulators (including Congress) have invited private sector providers to help ameliorate perceived problems. The first concerns an inadequate supply of nursing home beds in the early '70s, the next focuses on Medicare Advantage as a supposedly superior cost containment alternative to traditional Medicare, and the final one involves the 'devil's bargain' struck with the pharmaceutical industry to get prescription drug coverage added to Medicare. All three teach the same lesson: the government needs to be more vigilant not to give away the store when it invites the private sector in.