A Medicare Trial Period

David Leonhardt has an excellent column on how the real problem of the deficit boils down to Medicare and suggests a solution:

In the new issue of the journal Health Affairs, two doctors, both former Medicare officials, have laid out a plan to do so. It would give expensive new treatments three years to prove that they worked better than cheaper treatments, or their reimbursement rates would be cut to that of the cheaper treatments.

I understand that the idea will strike some people as — gasp — rationing. More modest ideas were shouted down during the debate over health reform. But I’d urge anyone who does not like the doctors’ plan to think a bit about how Medicare should be changed. The status quo isn’t really an option.

The article in question is from Stephen Pearson and Peter Bach and the article is here.

The proposal strikes me as a strong one. Still, to me the really striking thing about the market for health care delivery is the absence of innovations that are aimed primarily at cost-saving. In other sectors of the economy we frequently have firms built around the idea of slightly reduced quality in exchange for dramatically reduced cost. In health care, not so much. That makes it difficult for costs to do anything other than explode.