Tyler Cowen on Managed Care

Tyler Cowen's article in this past Friday's NYTimes brings the "unacknowledged monster lurking in the room" to the center of the healthcare debate: managed care.

For all the complaints, managed care does not seem to hurt actual health care outcomes, whether pertaining to life expectancy or recovery from disease, according to a series of papers by David Cutler, an economics professor at Harvard, and co-authors.

It’s time to consider which forms of managed care — relabeled, if necessary — are likely to maintain the flow of innovation while keeping costs under control.

For all of managed care’s problems, national bankruptcy would be considerably worse, and that’s where we’re heading if we don’t rein in health costs.

In EconLog, Arnold Kling makes an interesting comment on Cowen's article.

I think that what is implicit in his view is that we would rather outsource our rationing decisions than make them as individuals or families. Suppose that it is your aging parent who is offered the high-cost, low-benefit procedure and cannot afford it. Do you want to be under pressure to put up the money, or do you want the social norm to be that this decision is up to the managed-care provider?

Some people may be ready to make those tough decisions themselves, but I suspect most people would rather blame an institution than admit to a loved one that they don't want to pay for the hail mary procedure themselves.

Cowen isn't certain we're ready to accept that we have to ration health care.

The real challenge is to change our fundamental attitude toward health care. We live in a world where we can spend virtually everything we have on more and better treatment. The question is not managed care versus the status quo, but which opportunities — and the restrictions that go with them — we are prepared to accept.

When will we acknowledge that our government — or, for that matter, our insurance companies — can’t pay every bill? We’re in denial, and the longer we wait, the more painful the solution will be.