Public Policy Supply of Medical Services

California Task Force on Affordable Care’s Top 10 Recommendations

How can we improve health care?  The California Task Force on Affordable Care gives its top 10 recommendations in this report.  The report’s slogan is “ten ways Californians can save over $300 billion.”  These recommendations include:

  1. Implement bundled payments
  2. Hold hospitals accountable for progress in reducing utilization in targeted areas such as imaging
  3. Directly act to reduce hospital readmissions and hospital acquired infections
  4. Develop best practice guidelines that protect providers who use appropriate medical judgments in  targeted high-cost areas
  5. Common standards for billing, eligibility, and contracting
  6. Merge California’s two health insurance regulators, the Department of Insurance and the Department of Managed Healthcare.
  7. Create a sole-source insurance exchange for individuals and small businesses
  8. Increase support for shared decision making
  9. Impose a tax on high calorie, sweetened beverages.
  10. Make walking, biking, and the use of public transit viable, affordable, safe, and attractive

I will divide these ideas into the Good, the Mixed and the Bad.


Establishing common standards for billing, eligibility, and contracting (5)  should decrease transaction costs.  Forming a consensus of the exact standards, however, is often difficult.

Creating a single California health insurance regulator (6) makes sense since the distinct between managed care and traditionally insurance is blurred more and more every day.  Additionally, I am generally in favor of improving patient choice (8).

Make walking, biking, and the use of public transit viable, affordable, safe, and attractive (10) is a good idea generally in dense urban areas.  It not only will reduce pollution, but will improve health as more people walk to public transport instead of drive.  However, the flip side of making public transit more attractive is to make driving less attractive.  A gas tax is a good way to move people away from driving and towards public transit.


Bundled payment may have mixed effects (1).  In many cases, paying physicians a flat rate for certain treatments will incentivize physicians to treat patients with fewer resources.  This may decrease cost, but it may also reduce the quality of care if physicians no longer provide all the services that were previously included in the bundle.  Additionally, establishing an accurate bundled payment amount is often difficult and will be subject to significant pressure from provider lobbying groups.

Reducing imaging (2) will reduce costs not only reduce health care costs directly, but will also decrease the supply of medical services for the illnesses which these imaging techniques diagnose.  However, reducing imaging cost either through less frequent use of imaging or the use of less technically advanced imaging equipment likely will decrease the quality of care.  With less imaging, physicians will have less precise information with which to diagnose and treat patients.

Similarly, charging hospitals for readmissions and hospital acquired infections (3) sounds like a good idea, but may not function as well in practices.  Although there are times where poor health care results in a readmission, oftentimes, the patient’s condition worsens through no fault of the physician.  Identifying which readmissions are preventable and which are not if difficult in practices.  Similarly, charging hospitals for HAI may lead hospitals to claim that these infections are contracted outside of the hospital setting and thus attaching payment to HAI may causes hospitals to stop documenting HAI and thus hamper efforts to improve hospital sanitation.

Developing best practice guidelines (4) is generally a good idea.  Not only will physicians have the incentive to follow the most cost effective processes to date, but by doing so they will be protected against malpractice suits.  However, this provision may stifle innovation.  By establishing best practices as exempt from lawsuits, providers who test new techniques may be even more susceptible to lawsuits than they are now.  Thus, the number of innovative treatments may decrease.

A sole source health insurance exchange (7) should reduce the cost of health insurance to high risk individuals.  For the average consumer, however, costs may increase as sicker patients enter the market or may decrease because the increase number of beneficiaries may result in economies of scale.   Further, the single insurer may decrease the amount of adverse selection in the market.  However, a single health insurance exchange may have a single benefit structure which may not be optimal for a large share of the population.


Imposing a tax on high calorie, sweetened beverages (9) is a concept that I cannot support. Why single out soda as a social evil? What about chocolate cake? Why not tax taquerias? The health impact of these taxes will be small and companies with more clout will lobby to have their food designated as healthy when in fact it may not be. Let people decide for themselves what they want to eat.


Althought many of the California Task Force  on Affordable Care’s suggestions sound good on paper, implementing them in practice may not result in the cost saving and quality improvements promised.


  1. Interesting. Our hospital just asked us to meet with them to talk about employing our group. This is in the context of what they see as bundling becoming the new status quo.


  2. Nice article…I do disagree with your assessment of the soda tax. From a commentary article in the NEJM (…

    “In the past decade, per capita intake of calories from sugar-sweetened beverages has increased by nearly 30%, beverages now account for 10 to 15% of the calories consumed by children and adolescents. For each extra can or glass of sugared beverage consumed per day, the likelihood of a child’s becoming obese increases by 60%.”

    It is ultimately the ignorance and irresponsibility of the parents that breeds this epidemic.

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