THE ORSZAG-FURMAN AXIS.

Ryan Lizza's profile of Peter Orszag begins with a long Jon Stewart anecdote and ends by making some health care news. Thus, it is, in the eyes of this blog, virtually a perfect work. Here's the news:

Orszag’s job is to defend Obama’s budget on all fronts, but he will be most deeply engaged in health care. I asked him how he could be so sure that his ideas about how to reduce health-care costs would work, mentioning that I had been surprised to learn that Paul Ryan and other Republicans had seized on health-care cost controls as the issue they believed would bring down Obama’s health-care plan and, with it, they surely hoped, his Presidency. Specifically, they believed that Orszag’s obsession with “comparative effectiveness,” research about which treatment options work best for a given ailment, will lead to vast government intrusion into the doctor-patient relationship. The research, which received major funding in the stimulus legislation and which was also included in Obama’s budget, had assumed a sinister meaning on the right.

Orszag dismissed the criticism as a caricature. “I don’t see how it interferes with the doctor-patient relationship to suggest that it would be better if your doctor had more information about what would work for you,” he said. “The best way of putting it is that your doctor shouldn’t have disincentives to give you the higher-quality care, which often happens now.” Far from a huge government bureaucracy, he proposes a simple adjustment of incentives: “You get paid more if the treatment has been shown to be effective and a little less if not.”

This is an idea that's not associated with Orszag so much as with Jason Furman, one of Larry Summers' deputies at the National Economics Council. For a detailed summary of his proposal, see this article. But the short version is that you use evidence to change, rather than decide, reimbursement rates. Statins, for instance, are very effective and we want them to be widely used. So cover that at 100 percent. No out of pocket payment at all. Lumbar surgeries, conversely, are very ineffective, and the evidence suggests that fewer should be used. So cover them at 30 percent. You're not barring anyone from accessing the care they want. It's hard to say you're rationing. But you're setting the system's incentives to prioritize the care that works, and is cost effective.

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