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.
- CBO’s Long Term Budget Outlook Report — http://www.cbo.gov/ftpdocs/88xx/doc8877/12-13-LTBO.pdf
- Orszag’s Approach — http://www.bloomberg.com/apps/news?pid=20601103&sid=aW7_pYYvPYzQ&refer=us
- Kaiser Health Tracking Poll — http://www.kff.org/kaiserpolls/upload/7925.pdf