I am hoping that someone reading this post can help me answer a basic question: how will the proposed healthcare reform reduce costs?
It is very hard to disagree with President Barack Obama when he says that we should reduce inefficient and unnecessary healthcare spending. I am entirely in agreement. Who can be against that idea?
I’m less certain that reducing the overall cost of healthcare is a good idea. Innovation isn’t free. Indeed, spending more on healthcare to improve outcomes seems like a very good idea to me.
Still, supporters of the reform package being debated by Congress note that one of the big benefits is that the bill will reduce healthcare spending. But how will this actually happen? I am totally unclear on this point.
From what I can tell, the proposed legislation will expand insurance coverage dramatically, and force everyone in the country to have health insurance in one form or another. This move will surely increase the cost of healthcare; it won’t reduce spending on people who currently have insurance, and it will dramatically increase spending on people who don’t currently have insurance.
How will the legistlation reduce spending? The two drivers of healthcare costs are price and volume. Will the legislation reduce either one? If so, how?
Is there something I’m missing?