Len Nichols of NAF on Incentives in Health Care


Len Nichols of the New America Foundation is driving down the same “Middle Road” that the last panel plotted out.  So far, he’s applauded John McCain for realizing that price transparency has been a problem in the health care industry and he’s applauded Barack Obama for realizing that markets are a good idea and by advocating that a national health care policy focus on working with private insurers.

According to Len, these are the biggest problems with the existing system:

  • Incentives in the current system are perverse
  • Current players profit from the flaws in the system, so there are interests who want the system to stay the same
  • Individual choices affect health and health costs, bit time
  • There are tremendous barriers to change, but the status-quo is unacceptable


Len has gone on to note that the current financial and economic crisis gives us the motivation to reform, because it’s absolutely necessary.  He also notes Republicans and Democrats could come together on this issue as it will involve extended healthcare to the uninsured, while at the same time rolling back regulations, making prices transparent, and cutting back entitlement programs.

Perhaps this is good news for libertarians.  A system that allows for market forces to play out, even while being subsidized by federal dollars, would certainly be preferable to the existing system.  Costs under the current system are spiraling out of control because the entire system is geared toward inflated prices and not containing cost, but letting costs run wild.


What will reform look like based on bills by Hacker, Bauchus, and Obama? Len says:

  • There will be a new market for “employer market refugees”
  • Subsidies and a mandate for insurance policies
  • Delivery system reform
  • Creation of a Federal Health Board

To me, the first sounds great.  The second sounds like it’s moving in the direction of markets, which is absolutely needed in our quasi-universal coverage and entirely backwards system.  The third is out of my area of expertise, and the fourth sounds very scary.  I don’t like the idea of a Federal Reserve for health care, which is what Mr. Daschle has proposed.


Other details to expect according to Len:

  • Claims we cannot afford reform
  • Transparency
    • Price and comparative quality info coming to light
    • Critical gov’t program evaluations

The first claim sounds like business as usual out of some in Washington, but the second sound like good outcomes.


An interesting end note, Len makes that point that either health care professionals need to define a rational system of incentives for a national health care policy, or the government will produce more of the same.  Namely, they’ll be rolling out more Draconian price controls which won’t work.  They haven’t worked and they won’t work in the future.

Still, Len is answering questions from the audience by saying that instead of Draconian price controls, we need central control over insurance bundles.  Does this make sense?  It’d probably be better than folks in Baltimore setting the prices for everything from pulling a tooth to installing an artificial heart valve, but real market reforms means real markets.  Again, I can see the argument for a mandate and a subsidy, but price setting on insurance rates threatens to make the new system still a very bad one.

More to come, still blogging live…