The benchmark in today’s U.S. health-care debate could unnecessarily create winners and losers, without curbing escalating costs that threaten our global competitiveness.
The standard for measuring all reform efforts is how many uninsured individuals could be covered. No one doubts that is important. But it does nothing for the large majority who have health insurance but still feel the brunt of our health-care system’s underlying problem: excessive cost escalation.
At best, this primary focus on the uninsured leaves out the larger population, as well as the larger cost problem. At worst, it implicitly threatens the majority who have insurance coverage. We should seek to not only bring more people into the system but help current participants as well.
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Why should the focus on the uninsured concern those who are insured? Money. In a time of federal budget constraints, which will only worsen when senior entitlements begin increasing rapidly as Baby Boomers retire, there are no new revenue sources to further expand America’s health-care spending. Nor should new money be reform’s first requirement because America’s health care spending is already enormous.
Last year, America spent $1.8 trillion annually or 15.4 percent of its total economy on health care. According to the Centers for Medicare and Medicaid Services (CMS) in 1980, America spent $245 billion (8.8 percent of gross domestic product [GDP]); it is projected that by 2012 the figures will be $3.1 trillion (17.7 percent of GDP). Thus, in a generation, the share of the U.S. economy spent on health care will have doubled.
Combined federal budget constraints and existing high health-care spending means the search for resources to insure the uninsured is likely to focus on redirecting resources within the system. That means winners and losers, with losers inevitably those insured.
As the 1993 debate over the Clinton plan showed, reform that carries with it a perceived threat to the much larger insured population is doomed before it begins. This would be as much a mistake as it is unnecessary.
Instead of simply redirecting resources, the better tack is to look at increasing those resources’ efficient use. Information technology has transformed the rest of the U.S. economy and dramatically raised productivity but is in its infancy in health care. This IT infrastructure could lead to further innovations such as electronic prescriptions, electronic records, reduced administrative staff, increased ability to monitor treatment outcomes and performance, and enhanced ability to direct patients and resources to the best methods and providers. All these can reduce costs and create winners throughout the health-care system while bringing more people into it.
Health care’s rapid cost escalation is America’s greatest global economic challenge. To understand the challenge, consider that America’s 2000 health care per capita cost of $4,631 was almost double that of Germany ($2,748) and Canada ($2,535) and well more than double that of Japan ($2012) and Britain ($1,763).
But those comparisons provide only a hint of the magnitude. U.S. companies’ health-care costs far exceed the U.S. per capita cost. Further, America’s developed competitors often subsidize their companies’ health-care costs, while America’s developing competitors have health-care costs even lower than America’s subsidized developed competitors.
This challenge is not measured just in dollars today but in foregone opportunities. Nationally, we divert resources that could be used for research and development, investment in new technology and equipment, for hiring additional workers. Families must spend money that could be used for training and education, current savings, and retirement. In both cases, current costs compound over time and result in lower future national economic growth and individual living standards.
America’s central economic problem is health care, and health care’s central problem is cost. Decreasing U.S. global competitiveness and its uninsured are due to this dual dynamic.
It is crucial we not limit our view to a divisive strategy focused on one group while not addressing the underlying problem. If instead we address the systemic problem of unsustainable cost increases, we will not only reduce the number of uninsured by making health care more accessible, we will help everyone — including those who are now insured.
Analogous to the practice of medicine, we must not simply settle for making the patient more comfortable by ameliorating a symptom while leaving the disease uncured.
J.T. Young served in the Treasury Department and the Office for Management and Budget for President Bush, 2001-2004.
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