Asymmetrical Information - Megan McArdle

10.24.12

Why It's Hard to Control Health Care Costs

Our wonks say "No, no!" while our regulators say "Yes, yes!"

On the one hand, the adminstration spent a lot of time talking, early on, about "bending the cost curve."  On the other hand, they just settled a lawsuit by easing the restrictions on home health care provision.  You can argue that this is going to be good policy.  But it's going to cost money, and it's far from clear to me that we make it up by fewer nursing-home stays.  Yes, you keep some people out of nursing homes, but you also end up substituting for family members who otherwise would have helped out their relatives.  

The more worrying point, as Tyler Cowen points out, is that we aren't doing this deliberately; we're doing it in response to a lawsuit.  This is how health-care policy seems to proceed in this country: we make vague gestures toward cost control in public, while out of the public eye, regulators and congressmen make very specific commitments to provide more and more services.  Then we get all wide-eyed and wonder why costs are rising so much.