Friday, July 24, 2009

Health care: Importing the German model

Uwe Reinhardt over at the Economix blog is tickled about one of the latest developments in Congressional health care legislation -- the establishment of a panel of experts to decide what health care treatments Americans should be able to consume. As he says:
After a three-hour meeting at the White House on Tuesday, fiscally conservative Democrats in the House of Representatives — the so-called Blue Dog Democrats — got a tentative agreement on an addition to the health reform bill. The new provision would give an outside panel of health policy experts and stakeholders the power to make cuts to government-financed health care programs.

Although brushed off by some as a “pint-sized breakthrough in an ocean of concern,” Peter Orszag, the White House budget director, called it “probably the most important piece that can be added” to the health care bill in the House.

I could not agree more. Such a provision, if part of the final bill, would be the proverbial camel’s nose under the tent for a more rational approach to America’s health policy.

It would be a very big deal.
And by "rational" you can bet that he means "government-run". He might be right about the "very big deal" part however. Reinhardt adds that this is essentially borrowing an idea from Germany:
...An outside body of health policy specialists and stakeholders would be able to inform America’s health policy. It could provide insights from detached research and a consensus among experts and stakeholders, in place of the campaign contributions of powerful interest groups that now drive policy.

...To understand how such a body might function, Americans could learn from Germany’s experience with precisely such a body — Der Gemeinsame Bundesausschuss or, in English, the Joint Federal Committee.
So let's take a look at the Joint Federal Committee and its role in German health care. As the English language version of its website says:
The paramount decision-making body of the self-government is the Federal Joint Committee (G-BA). The G-BA has been institutionalised as a legal entity under public law. It has wide-ranging regulatory powers which are laid down in Volume Five of the Social Code Book that governs statutory health insurance.

One important area of responsibility of the G-BA is the assessment of new methods of medical diagnosis and treatment. In the sphere of ambulatory (outpatient) care in particular, the G-BA represents the "eye of the needle", through which a new method must gain a positive evaluation by the G-BA in terms of benefit and efficiency before it can be reimburse by the statutory health insurance funds. The Federal Committee's assessment of medical treatments and procedures follows a standardised procedure which rests on evidence-based medicine. The generally accepted current state of medical knowledge is ascertained for the purpose of assessing the effectiveness, quality and economic efficiency of the methods under examination.
In other words, in order for insurance to pay for a certain procedure it has to meet with the approval of this panel of unelected experts. It will be them, not you, who decide what treatments you are eligible to receive. If there is something new, experimental or otherwise unconventional that hasn't been approved, tough luck. Also note that the criteria includes "efficiency" -- meaning that not only does it have to work, but also do so within certain cost parameters.

Here's an alternative model: you decide what treatments you receive and whether they are worth paying for. You as an individual make decisions about costs and possible benefits. This is, after all, the model we use for pretty much everything else that seems to work remarkably well.


Ben said...

"It will be them, not you, who decide what treatments you are eligible to receive. If there is something new, experimental or otherwise unconventional that hasn't been approved, tough luck."

But why is that worse than having a clerk for an HMO or insurance company deny you coverage for a condition or treatment? At least in the German Model the unelected are presumably acting dispassionately rather than under the profit motive.

Colin said...

This is absolutely true, that in the current model you are beholden to the whims of insurance companies. It's a key reason why I advocate dispensing with this approach in favor of a fee for service model where insurance is only used for emergency and catastrophic events. As much as possible we need to give the consumer the freedom to weigh costs and benefits and make their own health care choices. I am not a fan of bureaucracy whether it is found in the private sector or public sector.

That said, at least with the current arrangement you get a choice of insurance companies and there are some competitive pressures to curtail the worst impulses of these companies. Just as they have a profit motive they also have the motive of trying to retain customers and keeping a good reputation. The government, as a monopoly, does not face such pressures.