Austin Frakt and I part company on the virtues of PPACA. Yet he’s been doing an excellent job of highlighting a vitally important concern about the new health law, namely its impact on private health costs. Earlier this week, he wrote:

I think the ACA has lots of provisions that could, if allowed to work, slow the growth of public health costs (Medicare and Medicaid). What about the private side? I’m not seeing a lot of help there. The best idea is the Cadillac tax and that doesn’t kick in until 2018 and won’t affect most policies for many years after.

Check out the implementation timeline from the Kaiser Family Foundation. See also Ezra Klein’s  list of cost controls (h/t Aaron Carroll). Did I miss something? Do you see anything that seriously addresses private health costs across the entire private sector? (The bundled payments idea is for Medicare, prudent purchasing applies to the exchanges. I’ve already mentioned the Cadillac tax.)

I have less confidence than Austin in the cost containment measures in the legislation. His point on the private side, however, is unanswerable. And the Cadillac tax is vastly weaker than the McCain approach. In a post on hospital mergers, Austin writes:

The only element of the new health reform law that might help is the Cadillac tax. That doesn’t kick in until 2018 and won’t have a substantial effect for at least a decade after that. I don’t think the American public is going to be satisfied with the rate of premium growth over the next two decades.

Moreover, the shift towards ACOs is designed to consolidate medical providers, thus giving them more rather than less pricing power. Even if we leave aside ACOs, Austin cites the growing number of planned and anticipated hospital mergers:

Hospitals are merging while the political focus is on increasing competition in the insurance market. If market power swings (further) in favor of hospitals, there’s really very little reason to be optimistic about a market-based solution to reducing health care costs on the private side.

I always cite Christensen-Grossman-Hwang on this subject, because they’ve written the most lucid treatment of the issues I’ve seen so far — one that goes beyond cliches about paying-for-quality, etc. In an interview with UCLA lecturer Jeremy Dann in BNet last summer, Christensen was discouraged about the health care debate:

The cost in the system is really driven by “business model malpractice” — using business models that weren’t designed well to provide the care that needs to be given.The cost is in the overhead in hospitals and doctors’ practices; it’s not really driven by how much we compensate physicians. The quality of care is driven by the extent to which processes for delivering care are tightly coupled, so that details don’t fall through the cracks. By tightly coupling care so that we diagnose diseases precisely, we will make sure we don’t have patients go from here to there, from this doctor to that doctor, and this department to that department.Then, by having appropriate business models tightly focused on the individual diseases, we reduce overhead costs.

And so, for Christensen, the most important step is deconsolidation of hospitals. Christensen’s assessment of the Massachusetts reform doesn’t bode well for the prospects of PPACA:

What the state government did was to solve one piece, but they haven’t put the other pieces of the puzzle into place. What they should have done was open up the gates so we could have accessible retail clinics and then help establish health savings accounts, into which the government would contribute and citizens could contribute on a subsidized basis. Then they should have had some sort of prepaid credit cards that they could swipe when they received care or pharmaceuticals.Those pieces of the system weren’t put into place here — nor are those pieces in the system being contemplated by the folks debating health and insurance reform in Washington.

Interestingly, Christensen believes that the kind of high-deductible policies that have been put in place for the formerly uninsured poor have worked very badly:

For the vast majority of formerly uninsured poor, they don’t incur thousands of dollars in the normal year for care, so they effectively are uninsured, since they have to pay thousands before coverage kicks in. But now they are also uncared for, since they are unable to go to the emergency room in the way they used to. We don’t have low-cost retail clinics in Massachusetts that would allow these people to get the everyday care they need economically. There’s a great shortage of primary care doctors. If you just recently got coverage, you could call around all day trying to find a doctor to meet with you. Then you might find one who could see you several months from now.

What I like about Christensen’s approach to these issues is that he’s paying attention to the small-bore, iterative questions that have a big impact. I tend to think that we should’ve done far more on the regulatory side to encourage deconsolidation and to facilitate the spread of low-cost retail clinics, etc. Yet the political coalition behind PPACA had to include existing general hospitals, that fear competition from specialty chains.