Health Care Bill — Where is the reform?

Don’t let anyone fool you — Health Care reform is essential. Why? Because from spending 1 out of $20 on health care in 1960 we have arrived at a point that we are spending 1 out of every $6 on health care now. And of course, this cost is expected to sky rocket. President Obama is right — exponentially growing health care costs, completely independent of making health care universal, will sink the American economy.

Strangely enough though, the current bill being considered by the House of Representatives is not about reform driving cost down and funding universal health care but universal health care without any meaningful reform. 

 Section 1 — CBO Report

To build the case though, allow me to start with some key facts and data points from the Congressional Budget Office’s (CBO) “Long Term Budget Outlook” published in 2007 regarding Health Care:

1. On Total Health Care Spending

A> “Total spending on health care in the United States, including both private and public spending, increased from 4.7 percent of GDP in 1960 to 14.9 percent in 2005, the most recent year for which such data are available.”  That is a greater than 300% increase in share of spending on health care obviously at a loss to other facets of life.

B> The report identifies the primary cause for this increase as, “Most analysts agree that the most important factor contributing to the growth in health care spending in recent decades has been the emergence, adoption, and widespread diffusion of new medical technologies and services.”

C> Other factors for cost increase identified in the report are rise in disposable family income, rise in insurance coverage and aging of the population.

2. On  Medicare Program

A> Overview of Medicare: “Medicare provides federal health insurance for nearly 43 million people who are aged (about 85 percent of enrollees) or disabled or who have end-stage renal disease. The elderly become eligible for Medicare at age 65; the disabled become eligible 24 months after their Social Security benefits start.”

B> Medicare is funded via various sources, payroll tax of 2.9% of taxable income, being a primary source. Think of it as money you are putting aside to be paid for medical care when you get old or, god forbid, disabled. CBO report also states, “As of June 2007, 18 percent of Medicare beneficiaries were enrolled in private health plans under the Medicare Advantage program,” i.e. were paying additional for enhanced coverage.

C> In 2006, Medicare spending totaled $382 billion.

3. On Medicaid Program

A> Medicaid is a joint federal–state program that pays for health care services for a variety of low-income individuals. The program was created in 1965 by the same legislation that created Medicare, replacing an earlier program of federal grants to states to provide medical care to people who have low income. The federal government’s share of Medicaid’s spending for benefits varies among the states and currently averages 57 percent.

B> In 2006, the total spending was $160.9B and total beneficiaries were 60.9M people. Out of which children accounted for 29.5M – approx. 50%.

Section 2 — some more key data points:

1. Americans spend $2.5T (trillion) annually on healthcare.

2. Medicaid is only 6.7% of the total healthcare bill for USA and hence hardly the cause for the crisis.

3. Kaiser Health Tracking Poll from June 2009 finds, “Struggling to afford needed care — The survey continues to find that a majority of Americans (55 %) say that they or another member of their household have put off some sort of needed medical care because of the cost over the past 12 months. About 1 in 4 say they have skipped a recommended test or treatment, and a similar percentage have chosen not to fill a prescription. 26% say they or a family member had problems paying medical bills over the past year, similar to the proportion reporting problems in our April tracking survey. This number rises to nearly half (48 %) among those suffering health problems, and is nearly as high (43 percent) among the uninsured.

Section 3 — Key observations based upon the above data

1. The astronomical growth in total spending on healthcare, with future innovations, can be guaranteed to continue if left unchecked. This implies that the discretionary funds available to US families to spend on other products will continue to decrease and hence depress the economy as a whole.

2. Medicaid, the only portion of the healthcare spending that is for the poor and reviled by the right wing of America is insignificant in this larger equation.

3. Insured Americans are feeling the stress of the healthcare cost as much as the uninsured.

4. HealthCare reform is needed to save American economy from the twin forces – one good and one bad:

A> medical innovation & new drugs – given each person’s primary focus on their health holds irresistible attraction to spend.

B> insurance cost and savvy marketing to sell drugs and procedures that are completely unnecessary

5. Approx. 50M Americans are uninsured. That is 1 in 6.

6. America spends twice as much as industrialized countries per capita for no better results.

7. And to all who believe that the British and Canadian systems are worse than the current American system I offer this: per Gallup poll, 56% of Americans are satisfied with their healthcare system as compared to 73% of Canadians and Britishers.

That said, the current Democratic proposal for health care reform does nothing to reform health care. It simply increases the taxes on the rich and re-ploughs some savings from AMA and some other sources to extend coverage to the uninsured. While I am not averse to increasing taxes on Americans in the top 1% income bracket, we should do so only if it is still required after fully optimizing our current bloated system.

And where has Peter Orszag’s, the White House Budget Director, plan gone? He proposes controls on cost and treatment via a new government organization that based upon scientific and systematic analysis recommends appropriate and effective treatment options in consultation with the doctors. The British system already has such a system in practice.  This organization is called National Institute for Health & Clinical Excellence . Read the brilliant article by Peter Singer on this topic, “Why We Must Ration Health Care.” And as pointed out earlier the Britishers are more satisfied with their system by a 17% spread compared to Americans.

I suspect that President Obama and Orszag have not pushed this option despite it being their preferred option under advice from House Democrats. They must have argued that there is misinformation in the media and public – given American aversion to large government organizations (despite the massive growth of government and government spending under President Bush somehow the myth persists that we have a small government) especially in matters pertaining to health, it is better to water down this proposal and achieve universal healthcare without true reform.

 That is usual politics of compromise which, in affect, pushes the real issue out in time making its affect even worse and making potential positive affect of a later day true reform minimal. But we need such an approach in the most dire of manners. Such an approach to healthcare combined with a Government insurance option, reduction in cost for drugs and care negotiated via this Government insurance option that does not work for profit is what is required to truly bring cost down without reducing the quality of care.

The current system, without providing insurance to 50M people, is ready to take us down the slope to economic oblivion. Real reform can curtail those costs, take out profiteering from the health care industry and extend healthcare to all at the same time.


  1. CBO’s Long Term Budget Outlook Report
  2. Orszag’s Approach
  3. Kaiser Health Tracking Poll —



8 Responses

  1. Excellent assessment. I have 20 yrs background as a consultant to teaching hospitals, focused on improving quality while reducing cost. In health care, you have to do both, simultaneously.

    Excepting many medical specialists, some sales people and conservative ideologues, nearly every person I worked with understood that only a single-payer national health plan would make the needed difference.

    As an exec at a health care IT company, I worked with many people in other nations; none preferred the American non-system to what they had in Singapore, Saudia Arabia, England, France, Germany, Canada, Australia… and more.

  2. Thanks for a very good summary of the problem! Some thoughts on reading your blog:

    1) Many (perhaps most) Americans are health care “illiterate”; that is, they do not really understand what disease is, what treatment options and limitations are, what doctors do, etc. I find this continually in my practice (I’m an ER doc).

    2) Most people THINK they understand heath care, since they have a body, they’ve gone to the doctor, they see doctors on tv…

    3) The health care debate is continually muddied by the intentional or unintentional conflation of two different entities: the health care SYSTEM (hospitals, clinics, doctors, nurses, techs) vs the PLAN, i.e. insurance. In single payer they are the same, but in all other systems they are different. For the record, having lived for some years in Europe, I am not wedded to one particular payment system. The Germans and Dutch have done extremely well without single payer. The main thing is to have an integrated delivery system (as compared to the American “mom and pop” doctor shops, and hospitals that function like malls), and universal coverage.

    4) I think that as part of reform efforts, everyone who has insurance (hopefully at some point that means everybody) should be required to attend fundamental health literacy classes, with a standardized curriculum covering basic health topics and explanations of what doctors actually do, and how payment systems work. right now everyone is shouting out everyone else in the healthcare debates, but it’s as if they aren’t even speaking the same language.

    As a last word, I recommend reading Uwe Reinhardt’s blog in the NYTimes. He is a health economist who really “gets it”, and he is very easy to read.

    Peace and Health,

    DR E

  3. With all due respect, you posted a comment to a Paul Krugman article that made the same comment you did in the beginning of this post. You said that 1 out of every 6$ is spent on healthcare and the next civilized country isn’t close and there is no discernible difference. That is either wrong or omitting so many facts as to be a meaningless statement. First you can’t just count all the countless billions spent on medical research as healthcare dollars being spent as if it being drained from the taxpayer, when it’s actually benefitting the taxpayer. Also, you can’t say there is no discernable difference when we have the highest cancer survival rate in the world and the highest life expectancy, if you isolate it to healthcare life expectancy. You are not allowed to put violent deaths and car crashes into the life expectancy calculation then ballyhoo about healthcare. It’s extremely dishonest.

    Finally, I don’t care that it was 1 in 20$ in 1960. Back then people didn’t get quad bypass surgery and survive at the rate they do now. There wasn’t aids meds, and the technology was nowhere near what it is now. It’s comparing apples and oranges. You know back in the 1200s, it was 0 out of 0 dollars because there weren’t dollars, and people died of abscessed teeth, or the common cold. You can’t make a silly comparison across time without noting the astonishing growth in healthcare technology since 1960. Robotics such as the DaVinci robot: unheard of in the 1960’s. The vast majority of the computer based advances were pipe-dreams in the 1960’s and by the 2060’s, what we are doing now may seem like neanderthal’s hitting rocks together as long as government doesn’t entangle itself in the healthcare system anymore than it already has. There will be no incentive to create a new better system, because there will be no reimbursement scheme from the government. I work in hospital finance, the less glamorous part of healthcare, and we write off so much bad debt because of medicare/medicaid because the government just flat out doesn’t pay it’s bills. What do you think will happen to those hospitals that are already on a razor-thin profit margin when the government takes over more of the market and continues to not pay their bills. Will you support the government bail-out and take over of hospitals? Will government need to run the entirety of healthcare, because Paul Krugman seems to think the only reason healthcare works at all is because the government.

    • Hi Robert,

      Thanks for your comment. Few points in response for you to consider:

      1. Life expectancy: see the link below — CIA factbook tells us that Canada and France, just to name two countries have life expectancy greater than 80 yrs while USA is between 77.5 to 80. Both of them happen to also have a fully government run healthcare system (something that I am not proposing and nor is Krugman).

      2. Secondly, a spend ratio of $1 out of $6 on health care is very important to macro economists–including what you are calling the meaningless dollars (a dollar spent is a dollar spent!). Think of it this way, we are spending only 5 out of 6 as oppose to 19 out of 20 dollars on “other” things. Why are the other things important? Because without that you will not have an economy. The equation is not linear,meaning if you get to $1 out of every $3 on healthcare, then the economy at large collapses and by inference health care also collapses rather than linearly improving with each $ being spent.

      3. Regarding what is driving the cost up — as I mention in the 1st section, 1.B — what is driving the cost up is innovation in medicine. Improving quality of life and life expectancy are both “good” things without a doubt. The question really is of balance due to item # 2 above. Cost and healthcare are supremely connected and to a point as cost rises health care improves, but at a certain inflexion point (say $1 out of $3 point), the curve collapses since the economy does.

      That’s why the focus on reducing cost while maintaining quality of care. Those are not conflicting goals, in fact, due to the huge waste in our system an easy goal to achieve if we can first politically achieve it.



  4. For some odd reason Republicans don’t want things to get better in health care (or anything else for that matter). They keep trying to strike fear into the hearts of the ignorant masses, of which there seems to be a major abundance. Educated people tend to see where the truths are that have been stated very aptly in the two comments above. I am not proud, and am very pessimistic about this country nowadays, and this after being taught all of my life that we were the best at anything. I fear that part of my education was merely propagandistic lies. How can one be proud of ignorance? How can one be proud of the evil I see in Republicans? How can one be proud of democrats who, while not evil, are certainly quite bumbling………

    • There in lies the rub. You have someone like Martin, who assumes that Republicans know the “truth” but are evil and don’t want anything to get better. This kind of arrogance and downright ignorance of anyone who doesn’t agree and think exactly like him is sad. I never ascribe bad motives to Democrats unless they have specifically stated said motive. It’s unfathomable to Martin that someone might disagree in good faith and think that socialized medicine is not a good idea. He thinks it’s only evil that drives Republicans, which is weird because Democrats will deny evil just about everywhere else in the world, except on the center right in America.

      It can only be evil that makes Republicans think that the government, which has never done anything efficiently or cost effectively, may make healthcare worse if they take it over. Only pure unadulterated evil could make someone think that. You know if that’s evil, then fine, call me evil, but working in finance at a hospital, I can tell you that Obamacare will assuredly drive many on the cusp hospitals into bankruptcy. That’s not an opinion, that’s just the numbers. My hospital will survive, but here in the Phoenix valley alone, I could think of at least 5 hospital systems that wouldn’t survive 5 years of Obamacare reimbursement.

      • You’re a bit negative about the government.

        For instance, we have the greatest military in the world, bar none. That’s a creation of the government.

        In addition, Social Security isn’t bad. My own experience with that institution has been quite positive. It would, of course, be better if Congress would stop using SS funds to pay for day-to-day government operations.

        It’s not that I think that socialized medicine is a good idea; instead, I think that private health insurance companies are a bad idea.

        See? Every coin has another side.

      • My comments come from what I’ve seen and experienced. Republicans have lied, evaded questions, bullied the gvernment, candidates and the people of this country. The Tea Party people? Not grass roots as Republicans say, but a Republican organization bussing its people around to further its interests…. Birthers? Give me a break. Public Option? Republicans in office howl at the prospect just like they howled when Social SAecuroity was enacted, just like they howled when medicare was enacted. I don’t mind discourse and opposing viewpoints, but not when they are based in lies and deception. I don’t watch FOX news because it is all lies and deception.

        So we have someone like Robert D who has been misled by the right wingers and doesn’t even realize it. Its sad, but what are you gonna do.

        People should wake up to the fact the the U.S. has to make some rather large changes to reflect the new realities in the world.

        The last 30 years of MISGOVERNMENT has left us in a precarious state.

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