Daily Archives: June 3, 2011

Roger Pielke Jnr, author of The Climate Fix, the best book I’ve read on the politics of climate change, offers some comments on the new German energy policy.

Given Merkel’s penchant for blowing with the political winds and the German public’s Wutbürger politics, we should expect German energy policies to continue to be anything but stable.  Germany’s energy policies have gone from potentially world-leading to incoherent in the blink of an eye. But perhaps part of the problem here is the tendency for analysts, me included, to see short-term change without fully appreciating the larger context. German democracy may presently be incapable of implementing a sensible energy policy. Regardless of Germany’s domestic politics, its efforts to rapidly ramp up renewables — if they actually stick as policies — will nonetheless provide a worthwhile laboratory for what is technologically possible, and thus bears close watching.

Looking at the big picture, the question now I suppose is how long must we wait until the next German energy policy U-turn?

 

Alain Enthoven, pioneer of “managed competition” and esteemed authority on health-care economics, has an excellent column on Ryan’s premium support plan (What Paul Ryan’s critics don’t know about health economics). Echoing arguments made by Alice Rivlin and Henry Aaron, he argues that the premium support approach would encourage the spread of accountable care organisations, and that these could make a big contribution to improving efficiency and lowering costs. Ryan’s indexation formula is too severe, Enthoven says, but the basic idea is sound.

At the root of the waste and excess is Medicare’s open-ended fee-for-service system, which pays health-care providers for doing more and more costly services, whether or not they’re in the patients’ best interests. Last year’s health-care reform legislation acknowledged that fundamental change is needed from the traditional fee-for-service model to a system in which doctors and hospitals team up to offer coordinated care and are held accountable for per-capita cost and quality. Hospitals and suppliers may participate in this Shared Savings Program by creating or joining an Accountable Care Organization (ACO).

Unfortunately, the incentives to form ACOs and to dramatically cut costs are far too weak and the regulations far too complicated…

A better way to encourage accountable care is the “premium-support” model proposed by House Budget Committee Chairman Paul Ryan, among others. This is a managed competition model in which government would make a defined contribution and beneficiaries would have a choice from a variety of health plans with no discrimination based on health status. Standard coverage contracts would make comparisons possible for ordinary people. Competition would drive health plans to innovate in ways that cut waste and improve quality. And the use of exchanges would drastically reduce marketing costs, so insurance companies would not be taking 20% off the top, as is currently the norm.

This is not “the end of Medicare,” as some would have you believe.

One thing I don’t understand is why Enthoven, like Ryan, takes such exception to the use of the term “voucher” in describing the premium support approach. Premium support is, to all intents and purposes, a voucher. What’s wrong with calling it that?

 

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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