RETHINKING REFORM experts recommend; they may know but disagree with the experts; the support systems needed to comply with the recommendations may be absent; or financial incentives may be misaligned. As has been observed in many contexts, it is diffi- cult to get people to understand something when their income depends on their t understanding it Cost-benefit trade-o ffs. Another major problem with care organization and deliv ery is insufficient attention to benefit-cost trade-offs. Most physicians are consci- entious about evaluating the benefits versus the risks of any intervention, but many fewer will consider costs, except perhaps for uninsured patients. Physicians often do not know what the costs are; they may believe that their responsibility is to deliver the best care that is technically possible, regardless of costs; or as Shojania and Grimshaw write, "Financial incentives may be misaligned. "ll Over the years, there has been a plethora of recommendations as to how physicians can contribute to more cost-effective care, but the fact that they have not been impl mented on a wide scale suggests that the problem is systemic in nature. Some ex perts advocate a complete overhaul of the financing of health care to give physi cians the information, opportunity, and incentive to deliver cost-effective care What Kind of reform? Policymakers seeking to reform health care face two fundamental questions Should reform be incremental or comprehensive? And should reform focus first on the financing of care or on the organization and delivery of care? a Incremental reform. Employer mandates. Most incremental reform proposals fo- cus on financing-in particular, on reducing the number of uninsured people. Some reformers seek to increase coverage by mandating that all employers above some specified size offer their workers health insurance; these mandates may or may not pe accompanied by subsidies or tax credits to the firms. One economic rationale for employer mandates is that the cost of care for uninsured workers is often passed along to the insured through taxes and other mechanisms. Mandates are, in part,an attempt to eliminate" free riders. " Their possible negative effects include loss of er ployment, especially for workers who are at or near the minimum wage, which makes it impossible for firms to pass on the costs by reducing wages. Firms that are below the specified minimum size that trigger the mandate could be discouraged from expanding or could resort to using more part-time or temporary workers toes cape the mandate. When mandates are legislated at the state rather than the federal level, firms have an incentive to move to a state that does not have a mandate, even though economic efficiency would be greater in their original location Subsidies. Another incremental approach would provide subsidies for the unin sured, usually through tax credits, to purchase insurance in the individual mar- ket. The main advantage claimed for this approach is that it increases freedom of choice and does not intrude directly on the labor market. It could have indirect ef- fects such as reducing the numbers of workers covered by employers. If subsidies 1402 ember/December 2005RETHINKIN G REFOR M experts recommend; they may know but disagree with the experts; the support systems needed to comply with the recommendations may be absent; or financial incentives may be misaligned. As has been observed in many contexts, it is diffi￾cult to get people to understand something when their income depends on their not understanding it. Cost-benefit trade-offs. Another major problem with care organization and deliv￾ery is insufficient attention to benefit-cost trade-offs. Most physicians are consci￾entious about evaluating the benefits versus the risks of any intervention, but many fewer wall consider costs, except perhaps for uninsured patients. Physicians often do not know what the costs are; they may believe that their responsibility is to deliver the best care that is technically possible, regardless of costs; or as Shojania and Grimshaw write, "Financial incentives may be misaligned."" Over the years, there has been a plethora of recommendations as to how physicians can contribute to more cost-effective care, but the fact that they have not been imple￾mented on a wdde scale suggests that the problem is systemic in nature. Some ex￾perts advocate a complete overhaul of the financing of health care to give physi￾cians the information, opportunity, and incentive to deliver cost-effective care. What Kind Of Reform? Policymakers seeking to reform health care face two fundamental questions: Should reform be incremental or comprehensive? And should reform focus first on the financing of care or on the organization and delivery of care? • Incremental reform. Employer mandates. Most incremental reform proposals fo￾cus on financing—in particular, on reducing the number of uninsured people. Some reformers seek to increase coverage by mandating that all employers above some specified size offer their workers health insurance; these mandates may or may not be accompanied by subsidies or tax credits to the firms. One economic rationale for employer mandates is that the cost of care for uninsured workers is often passed along to the insured through taxes and other mechanisms. Mandates are, in part, an attempt to eliminate "free riders." Their possible negative effects include loss of em￾ployment, especially for workers who are at or near the minimum wage, which makes it impossible for firms to pass on the costs by reducing wages. Firms that are below the specified minimum size that trigger the mandate could be discouraged from expanding or could resort to using more part-time or temporary workers to es￾cape the mandate. When mandates are legislated at the state rather than the federal level, firms have an incentive to move to a state that does not have a mandate, even though economic efficiency would be greater in their original location. Subsidies. Another incremental approach would provide subsidies for the unin￾sured, usually through tax credits, to purchase insurance in the individual mar￾ket.^^ The main advantage claimed for this approach is that it increases freedom of choice and does not intrude directly on the labor market. It could have indirect ef￾fects such as reducing the numbers of workers covered by employers.'^ If subsidies 1402 November/December 2005