Magnetic resonance imaging (MRI) is a technology frequently used to evaluate low back pain, despite evidence that challenges the usefulness of routine MRI and the surgical interventions it may trigger. We analyze the relationship between MRI supply and care for fee-for-service Medicare patients with low back pain. We find that increases in MRI supply are related to higher use of both low back MRI and surgery. This is worrisome, and careful attention should be paid to assessing the outcomes for patients.

The current focus of the health reform debate is rightfully beginning to shift to the need to transform the delivery system to contain the long run growth in costs. Although much of the debate still focuses on the role of a public plan, this ignores the need for fundamental change. None of the options on the table will transform the delivery system. If passed, the best the current proposals could do is to expand enrollment and perhaps contain federal costs, but on its own the public plan will be unable to make the delivery system more efficient.

To control health care costs, I propose a publicly chartered major risk pool, or MRP, that
will allow plans to pool risk, thereby eliminating the need for wasteful underwriting and
selective marketing costs. Participation in the MRP by both providers and insurers is
voluntary. It can be combined with any public option in an exchange implemented at the
federal or state level; it can even work without a public option. After a brief transition
period, the MRP requires no federal funds and will not be “on budget.” By allowing private plans to play a role in a transformed insurance and delivery system, the MRP can be politically attractive to a broader constituency than any of the current proposals.

The MRP addresses a key component of comprehensive health reform: restructuring the
delivery system. It is not a simple reinsurance pool that reimburses health plans for high costclaims. Instead, it creates a reformed payment system for both inpatient care and outpatient chronic care that will encourage efficiency and quality. The MRP will cover inpatient and similar short but expensive episodes, as well as chronic illness management. Its new payment approaches will achieve the efficiency goals promised by proposals for hospital medical staff-focused Accountable Care Organizations, but in an organizationally more plausible manner. Hospitals and physicians who focus on inpatient care and voluntarily form Care Delivery Teams will receive bundled episode-based payments, but the MRP will pay providers regardless of whether they belong to a Care Delivery Team, although at less attractive rates. Providers in these teams can use their bargaining power to charge the primary insurers more than the MRP pays. The MRP’s payments for monthly chronic illness management will give health plans and primary care physicians the incentives, flexibility, and information to more effectively compensate clinicians for the care they deliver and coordinate. By being publicly chartered, but independent of Congress, and by allowing options for all players, the MRP will be able to sidestep the ability of special interests to block change.

As pressure builds on the White House and Congress to deliver on their promise of health care reform, the idea of a government health insurance company to compete with for-profit and not-for-profit private companies is gaining political momentum. Advocates claim that this new company would be more efficient, honest, and successful in forcing lower reimbursement rates on physicians and hospitals. However, a close look at how the present health care system functions, what its major problems are, and what reforms are needed to solve them suggests that this new idea is not the answer. The three major problems of the current U.S. system are that 45 million to 50 million people have no health insurance, the cost of care is high and rapidly increasing, and there are gross lapses in the quality of care. There is no reason to think that a government insurance company would make a significant dent in any one of these problems, let alone all three. To do that would require real reform in the financing, organization, and delivery of care.