The Health Care Crisis: What to Do About It

Krugman and Wells Demolish Our current health care system of arrangements:

Rising health care spending, then, is driving a triple crisis. The fastest-moving piece of that crisis is the unraveling of employer-based coverage. There's a gradually building crisis in Medicaid. And there's a long-term federal budget crisis driven mainly by rising health care spending.

Remember the 80–20 rule: the great bulk of medical expenses are accounted for by a small number of people requiring very expensive treatment. When you think of the problem of health care costs, you shouldn't envision visits to the family physician to talk about a sore throat; you should think about coronary bypass operations, dialysis, and chemotherapy. Nobody is proposing a consumer-directed health care plan that would force individuals to pay a large share of extreme medical expenses, such as the costs of chemotherapy, out of pocket. And that means that consumer-directed health care can't promote savings on the treatments that account for most of what we spend on health care.

The administration's plans for consumer-directed health care, then, are a diversion from meaningful health care reform, and will actually worsen our health care problems. In fact, some reformers privately hope that George W. Bush manages to get his health care plans passed, because they believe that they will hasten the collapse of employment-based coverage and pave the way for real reform. (The suffering along the way would be huge.)

Every week, Grover Norquist has a breakfast that includes many of the conservative luminaries.   This ritual demonstrates the religion of the Republican movement - not the protection of babies or marriage - but tax cuts.  It is an easy religion to promote.  It feeds on the culture's selfishness.  It elevates the myth of self-sufficiency.   It glorifies the fantasy of rationality.  It punishes those who fail.

Similarly, the left would benefit from such organization.  I submit that - more than Iraq, unwanted pregnancies, or gun control - health care is our "tax cut."  A concerted effort by activists and progressives to create a single-payer plan would benefit the country, and liberate immense resources for other services.   

A single payer plan would have the deepest economic ripple effect in the nation's economy.   It would allow businesses to hire people without paying into insurance plans; single mothers wouldn't have to worry about pre-natal care; the poor would get reliable health care; and the working poor would not have to live so precariously.  Krugman and Wells state:  it would be politically smarter as well as economically superior to go for broke: to propose a straightforward single-payer system, and try to sell voters on the huge advantages such a system would bring.

I am a Christian Too has written a four part series on health care, with scripture and data!

They argue:

The first is that the US health care system is extremely inefficient, and this inefficiency becomes more costly as the health care sector becomes a larger fraction of the economy. Suppose, for example, that we believe that 30 percent of US health care spending is wasted, and always has been. In 1960, when health care was only 5.2 percent of GDP, that meant waste equal to only 1.5 percent of GDP. Now that the share of health care in the economy has more than tripled, so has the waste.

This inefficiency is a bad thing in itself. What makes it literally fatal to thousands of Americans each year is that the inefficiency of our health care system exacerbates a second problem: our health care system often makes irrational choices, and rising costs exacerbate those irrationalities. Specifically, American health care tends to divide the population into insiders and outsiders. Insiders, who have good insurance, receive everything modern medicine can provide, no matter how expensive. Outsiders, who have poor insurance or none at all, receive very little. To take just one example, one study found that among Americans diagnosed with colorectal cancer, those without insurance were 70 percent more likely than those with insurance to die over the next three years.

After discussing why the current system of arrangements is unraveling, they discuss how medicaid has been filling the gap in care:

...  Medicaid has grown rapidly in recent years because it has been picking up the slack from the unraveling system of employer-based insurance. Between 2000 and 2004 the number of Americans covered by Medicaid rose by a remarkable eight million. Over the same period the ranks of the uninsured rose by six million. So without the growth of Medicaid, the uninsured population would have exploded, and we'd be facing a severe crisis in medical care.

But Medicaid, even as it becomes increasingly essential to tens of millions of Americans, is also becoming increasingly vulnerable to political attack. To some extent this reflects the political weakness of any means-tested program serving the poor and near poor. As the British welfare scholar Richard Titmuss said, "Programs for the poor are poor programs." Unlike Medicare's clients—the feared senior group—Medicaid recipients aren't a potent political constituency: they are, on average, poor and poorly educated, with low voter participation. As a result, funding for Medicaid depends on politicians' sense of decency, always a fragile foundation for policy.

... That is, our health care system makes more mistakes than those of other countries, and is unique in denying necessary care to people who lack insurance and can't pay cash. The frequent claim that the United States pays high medical prices to avoid long waiting lists for care also fails to hold up in the face of the evidence: there are long waiting lists for elective surgery in some non-US systems, but not all, and the procedures for which these waiting lists exist account for only 3 percent of US health care spending.

But the main source of high US costs is probably the unique degree to which the US system relies on private rather than public health insurance, reflected in the uniquely high US share of private spending in total health care expenditure.

Over the years since the failure of the Clinton health plan, a great deal of evidence has accumulated on the relative merits of private and public health insurance. As far as we have been able to ascertain, all of that evidence indicates that public insurance of the kind available in several European countries and others such as Taiwan achieves equal or better results at much lower cost. This conclusion applies to comparisons within the United States as well as across countries. For example, a study conducted by researchers at the Urban Institute found that

per capita spending for an adult Medicaid beneficiary in poor health would rise from $9,615 to $14,785 if the person were insured privately and received services consistent with private utilization levels and private provider payment rates.^[4] 

The cost advantage of public health insurance appears to arise from two main sources. The first is lower administrative costs. Private insurers spend large sums fighting adverse selection, trying to identify and screen out high-cost customers. Systems such as Medicare, which covers every American sixty-five or older, or the Canadian single-payer system, which covers everyone, avoid these costs. In 2003 Medicare spent less than 2 percent of its resources on administration, while private insurance companies spent more than 13 percent.

At the same time, the fragmentation of a system that relies largely on private insurance leads both to administrative complexity because of differences in coverage among individuals and to what is, in effect, a zero-sum struggle between different players in the system, each trying to stick others with the bill. Many estimates suggest that the paperwork imposed on health care providers by the fragmentation of the US system costs several times as much as the direct costs borne by the insurers.

The second source of savings in a system of public health insurance is the ability to bargain with suppliers, especially drug companies, for lower prices. Residents of the United States notoriously pay much higher prices for prescription drugs than residents of other advanced countries, including Canada. What is less known is that both Medicaid and, to an even greater extent, the Veterans' Administration, get discounts similar to or greater than those received by the Canadian health system.

We're talking about large cost savings. Indeed, the available evidence suggests that if the United States were to replace its current complex mix of health insurance systems with standardized, universal coverage, the savings would be so large that we could cover all those currently uninsured, yet end up spending less overall. That's what happened in Taiwan, which adopted a single-payer system in 1995: the percentage of the population with health insurance soared from 57 percent to 97 percent, yet health care costs actually grew more slowly than one would have predicted from trends before the change in system.

...

In summary, then, the obvious way to make the US health care system more efficient is to make it more like the systems of other advanced countries, and more like the most efficient parts of our own system. That means a shift from private insurance to public insurance, and greater government involvement in the provision of health care—if not publicly run hospitals and clinics, at least a much larger government role in creating integrated record-keeping and quality control. Such a system would probably allow individuals to purchase additional medical care, as they can in Britain (although not in Canada). But the core of the system would be government insurance—"Medicare for all," as Ted Kennedy puts it.

Unfortunately, the US political system seems unready to do what is both obvious and humane. The 2003 legislation that added drug coverage to Medicare illustrates some of the political difficulties. Although it's rarely described this way, Medicare is a single-payer system covering many of the health costs of older Americans. (Canada's universal single-payer system is, in fact, also called Medicare.) And it has some though not all the advantages of broader single-payer systems, notably low administrative costs.

But in adding a drug benefit to Medicare, the Bush administration and its allies in Congress were driven both by a desire to appease the insurance and pharmaceutical lobbies and by an ideology that insists on the superiority of the private sector even when the public sector has demonstrably lower costs. So they devised a plan that works very differently from traditional Medicare. In fact, Medicare Part D, the drug benefit, isn't a program in which the government provides drug insurance. It's a program in which private insurance companies receive subsidies to offer insurance—and seniors aren't allowed to deal directly with Medicare.

And what of rationing? 

Our Princeton colleague Uwe Reinhardt, a leading economic expert on health care, put it this way: our focus right now should be on eliminating the gross inefficiencies we know exist in the US health care system. If we do that, we will be able to cover the uninsured while spending less than we do now. Only then should we address the issue of what not to do; that's tomorrow's issue, not today's.

...But things may have to get much worse before reality can break through the combination of powerful interest groups and free-market ideology.

 

 

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