- The Washington Times - Monday, February 4, 2008

ANALYSIS/OPINION:

Americans will spend about 16 percent of gross domestic product (GDP) on health care this year. That will amount to about $2.3 trillion, or roughly four times what we will spend on national defense, including the wars in Iraq and Afghanistan. “At 16 percent of GDP, U.S. health spending is double the median of industrialized countries, and since 2000, [U.S. health spending] has been growing more rapidly than before,” according to “U.S. Health System Performance: A National Scorecard,” an article that appeared in the September 2006 issue of Health Affairs. By way of comparison, according to a report last year by the Organization of Economic Cooperation and Development, the United Kingdom spent 8.3 percent of its GDP on health; Canada spent 9.9 percent; Germany spent 10.9 percent; Spain spent 8.1 percent; and Japan spent 8 percent.

As recently as 1980, total U.S. health expenditures amounted to 9.1 percent of GDP. According to Congressional Budget Office (CBO) Director Peter Orszag’s recent testimony before the Senate Budget Committee: “CBO projects that, without changes in law, total spending on health care will rise from 16 percent of GDP in 2007 to 25 percent in 2025 and 49 percent in 2082.” Since 2000, as the cost of health insurance premiums increased 98 percent for a family of four (nearly five times the rate of inflation), the number of uninsured Americans has increased from 38 million (13.7 percent of the population) to 47 million (15.8 percent). In 2007, according to a recent report by the Henry J. Kaiser Family Foundation, the average employer-provided health maintenance organization family insurance premium cost $11,879.

While it is routinely asserted that America’s health care system is the best in the world, the reality is that American health outcomes (longevity, infant mortality, incidence of preventable chronic disease) are significantly inferior to those of many other countries, all of which spend much less on health care per capita than America does. Clearly, America’s health care problems will pose a major challenge to the next administration. Here is how the leading candidates would deal with health care.

Generally speaking, Democrats Hillary Clinton and Barack Obama would maintain the employer-based system, which provides health insurance to about 63 percent of Americans under the age of 65. Mrs. Clinton would achieve universal health coverage by requiring everyone to have insurance. Mr. Obama would only require children to have insurance. Both would require large employers to provide insurance or contribute to the cost. But both have also proposed to significantly increase the role of government in addressing the problem of the uninsured. Both would expand Medicaid and the State Children’s Health Insurance Program (SCHIP). Both would partly pay for their programs by allowing the Bush tax cuts to expire for households earning more than $250,000.

Mrs. Clinton would provide tax credits to small businesses to encourage them to maintain insurance or begin offering plans to their employees. She would also provide refundable tax credits to low- and middle-income individuals and families to help them pay insurance premiums. People could choose from a menu of private options and a Medicare-style public plan, all of which would be based on the health program available to federal employees. Mrs. Clinton estimates her plan would cost about $110 billion per year.

In addition to providing “income-related subsidies” to help people purchase insurance, Mr. Obama would “establish a new public insurance program, available to Americans who neither qualify for Medicaid or SCHIP nor have access to insurance through their employers, as well as to small businesses that want to offer insurance to their employees.” Mr. Obama, who estimates his plan would cost $50 billion to $60 billion a year, promises that “premiums will go down” for businesses and workers because he will have the federal government assume a large (but unspecified) share of the costs of the “two out of every 10 patients [who] account for more than 80 percent of all health care costs.”

While Democrats are promising to maintain the employer-based system, Republican candidates Mitt Romney, John McCain and Mike Huckabee are offering health plans that would seek to gradually shift the burden from employer-provided health insurance to a system that would encourage families to use tax incentives to obtain health insurance from the private market. Mr. Huckabee says, it is time to “move from employer-based to consumer-based health care.”

Republicans pledge to reduce the cost pressures and to make health insurance more accessible by (1) giving states more freedom to operate (e.g., Mr. Romney wants to give states block grants for Medicaid); (2) pursuing tort reform in order to “eliminate frivolous lawsuits and excessive damage awards,” which is how Mr. McCain put it; (3) expanding health savings accounts; (4) making health insurance more portable from one job to another; (5) providing tax deductions to help middle- and upper-income families and individuals purchase insurance in the private market; and (6) offering refundable tax credits to low-income people.

Mr. McCain emphasizes the necessity of controlling the rise of health costs, but it isn’t at all clear how he could implement his plan to base health care payments by government on good outcomes. In a claim that makes the cost estimates of Mr. Obama and Mrs. Clinton almost credible (a monumental achievement), Mr. Romney “estimates that his plan would reduce overall health care spending by 6 percent and says it would result in no new taxes,” according to the National Journal. Democrats are almost certainly lowballing their annual cost estimates for achieving or approaching universal health coverage. And Republicans are almost certainly offering tax incentives that are inadequate to even begin addressing the problem of rising numbers of uninsured Americans.

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