By focusing only on covering the uninsured, are we solving the wrong problem?
11 April
The traditional Beltway logic on health care reform goes like this:
- The problem is that 46 million Americans lack health insurance. (I addressed why this number is incorrect and misleading last Thursday.)
- Government should provide health insurance to those 46 million people, or at least pay for it.
- Let’s expand a taxpayer-subsidized health insurance program to cover the 46 million, or maybe create a new program.
- (Alternately: Let’s mandate that everyone has to buy/have health insurance.)
- This means everyone will have health insurance. We have solved the problem.
Much of the health policy debate centers on how to solve this problem. Liberals want to expand government programs: Medcaid, S-CHIP, Medicare, or the federal employee health benefit program (FEHBP). Conservatives argue that we should instead provide tax incentives to subsidize the purchase of private health insurance.
I fall in the latter camp. My preferred health reform includes taxpayer subsidies for the purchase of private health insurance. But before we jump into the argument about the solution, it is important that we define the problem correctly. Today I would like to challenge the premise that the goal of health reform should be only, or even primarily, to provide taxpayer-subsidized health insurance to those who are uninsured. That defines the problem too narrowly.
Here is my alternate logic:
- The problems are (a) health insurance is expensive, and (b) the cost of health insurance grows faster than compensation.
- These two factors (expensive and getting more so) mean that:
- Private health insurance gets more expensive each year for the 202 million Americans who have it. This directly squeezes wages when health insurance is provided by an employer, and household budgets no matter how it is purchased.
- Uninsured people cannot afford health insurance. Those who can just barely afford it this year risk losing it next year and becoming uninsured as their premiums grow faster than their wages.
- Public health insurance expenditures for Medicare, Medicaid, S-CHIP, and FEHBP roughly track private health insurance expenditures over time. High and rapidly-growing health insurance costs therefore crush federal and state government budgets.
- If we can figure out ways to make health insurance less expensive, and/or slow the growth of health insurance premiums, we will solve all three of these problems.
- If our solution slows the growth rate of health insurance premiums, we will have a lasting solution, unlike those solutions which just shift costs from one payor to another (usually, the taxpayer).
Washington focuses on the blue box problem, driven by the phrases “46 million uninsured” and “universal coverage.” In doing so, policymakers often forget that the red box problem is the primary cause of the blue box problem.
I argue that policymakers should try to solve the red box problem, not the blue box problem, for two reasons:
- Solving the red box problem solves the blue box problem of the 11-35 million uninsured. It also helps the 200+ million people who have private health insurance, and it helps solve the #1 problem of federal and state government budgets.
- If you just try to solve the blue box problem, and if you do so by shifting the costs onto someone else (the taxpayer), you will end up chasing your tail, because within a few years the growth of health insurance premiums will put you right back where you started. You will create an additional unsustainable burden on the taxpayer.
Rather than just trying to expand taxpayer-financed health insurance to the uninsured, policymakers should try to understand and address why health insurance is expensive and getting more so each year. If they can address the red box problem, they will solve all three symptoms and create a longer-lasting solution.
My alternate logic may seem trivially obvious. Yet in Washington it is frequently forgotten or ignored.
Related Posts
(best matches are listed first)- How many uninsured people need additional help from taxpayers?
- Health spending fallacy
- Health insurance for poor kids
- Parsing the President’s health care reform letter
- Understanding the House Democrats’ health care bill
- CBO: More taxpayer-financed health insurance coverage won’t save money
- Ten more things about the official Kennedy-Dodd health care bill
- Understanding the Kennedy health care bill
Interesting way of reframing the current debate on health care that Washington politicians have been perpetuating.
One way that other wealthy countries (Canada, Australia, Denmark, Norway, Sweden and others) address cost containment is to take a more rationalized, actuarial approach towards treating illness, in addition to devoting more resources towards preventative care. An actuarial approach can seem cold and hard in a place (the U.S.) where people think it's their right to get the doctor and treatment that they want, and now.
How would we feel if we have a bum knee, and the health care practitioner says to you, "Well, you have a slightly torn ACL, but unfortunately it's a Grade 2, which means you will be in a 3-6 month cue for arthroscopic surgery." Or what if your uncle is old, infirmed and chronically ill, and you are told, "Well, with older patients such as your uncle, our treatment protocol dictates that we make him comfortable and send him home to be with family, rather than throw a medical Hail Mary that would cost $100,000's with no certain outcome." Or what if you're 41 and after trying to have a child "unassisted", you go to the doctor to try fertility treatment. The doctor tells you, "I'm sorry, but our cutoff is 40 years old, we can't pay for the cost of treatment."
Then again, the poor and uninsured in the U.S. already put up with much worse in many instances.
Containing costs on the "corporate" side of healthcare (i.e. pharma, doctors, insurance companies, health care equipment and service providers, etc.) seems to be such a intractable problem in the U.S. because we are, as a society, accepting of the fact that all of these cost-creators (drugs, doctors, insurance co's, etc.) are profit centers. And these profit centers are as well-connected to Washington as any industry. And they will fight as if their lives depend on it to keep the system as it is, for obvious reasons.
Any way you look at it, making healthcare accessible and affordable to all Americans will take courage and will and sacrifice. Thanks for addressing these issues Keith.
Well, you might have oversimplified it. But, as you rightfully point out simplification of a problem is a trait that has been lost on many occupying the Beltway these days.
Nevertheless, I see health care and the public in the same light as GM and the UAW. People, like the UAW, are constantly draining the system, which is GM, expecting more and wondering why the well is drying up. However, the medical community, or GM, is constantly looking for a way raise profitability and sticking to those who pay their premiums regardless of how much it hurts.
Health insurance, like a vehicle, is a must nowadays. And like GM, the health care community figures people are going to find a way to obtain it, no matter the cost. So they keep raising the premiums to compensate for those taking advantage of the system. End result is the same as always, the consumer gets raped.
This problem, like most in our country today, may originate from a bad attitude by consumers and the medical community. Or maybe I am just way off base. If I am right, though, the only problem remaining is how do you regulate attitude? '
Anyways, great post Mr. Hennessey .
I enjoy your blog, but please give us a full RSS feed. I would read more of your posts if you did not use a truncated feed.
Excellent thinking. Breaking down the contributors to health insurance costs (and their rates of increase) into categories, as you did for the “46 million uninsured,” might help cut through the analytical thicket of insurance premium overgrowth. Has anyone attempted that? Is sufficient data available?
Keith, A large portion of the remaining uninsured are people between jobs and will likely have insurance a few weeks or months down the road. Of course, they will be replaced by others who recently have become unemployed only to find employment and insurance in a few weeks or months. Like those living in poverty, the uninsured are an ever changing pool of people, only the turn around is much quicker.
The Obama administration's and the media's distortion of this issue is so relentless, that I would like to suggest picking a date when every conservative journalist, commentator, radio host and blogger dedicates their column, microphone, TV show and blog to set the issue straight with the data you presented.
When I tell people about this they simply don't believe me until I show them the U.S. Census data.
Best,
Richard Palmer
Newport Beach
I suppose only "government approved" halth plans could be used. A low cost plan might not include expensive procedures, e.g. heart transplant. But then what happens if the subscriber needs one? I like the idea, but there are pitfalls.
Way back when, Peter Drucker analyzed the rise in medical costs. None of these "solutions" deal with this problem and no one seems to want to address our lack of funds to pay for it. We have a budget deficit of $1.8T this year. That means we feel $1.8T richer than we really are. Now we're talking about all the new goodies that we're going to buy. We can't afford what we have right now. It's time to deal with the reality that we're all going to die some day, that some people will not get the best health care and that trying to overcome these two things will drag everyone down together.
I agree Keith. I hope you will continue to develop this series. It might be helpful to distinguish between health care and health insurance. What is driving the increases in health care costs? Is it the consumption of more units, or is the per unit cost increasing? Does cost shifting play a part? On what sort of things are most of the health care costs incured, end of life? What are the future economic implications of Medicare?
I would like to hear what you think are efficient ways to contain health care costs. Health IT, preventative care….etc…
And I think we have to address both, the Red and Blue boxes.
Agree
The problem is not just the cost of health insurance but *obtaining* insurance. Right now we have two different sets of rules. Group insurance (employer-based) coverage is guaranteed issue. Employees do not have to pass medical underwriting to obtain coverage through their employer. With the exception of 5 states, individuals have to pass medical underwriting to obtain an insurance policy. Most people would be shocked to learn that some of the most trivial current or past ailments in an individual’s health history are grounds for denial of coverage. You will be rejected by an insurance company even if you are in good health but the insurer believes there is a potential that you might not be in the future. Many states do not have high risk pools that people who are rejected from private coverage can participate in.
Any person who is against guaranteed access, community-rated universal healthcare for everyone in America should disclose if they currently have health insurance and how they obtained that policy.
Deborah
William, what drives health care costs is that capital spending actually increases labor costs. Unlike a factory where a new, robotic assembly line will reduce labor costs, that new CAT scan machine increases cots as it requires increasingly skilled labor to operate it and interpret the results. Since everyone wants the best of care and it's heartless to suggest that some should not get it, we've been endlessly increasing the costs of running hospitals year after year.
If we can just spend enough, we will never die and everyone will be able to get exotic organ transplants, right? Or maybe there's some magic insurance formula that will allow us to afford these tools and drugs, right?
Analogy: Are you driving a Lotus Esprit? Why not? Why aren't we all?
Rather than saying "capital spending", would it be more accurate to say technological advances which may have one of two effects: 1) new therapies that did not exist before (which results in expenditures where there were none previously. e.g., knee replacements after they invented metal jonts.), or 2) improved therapies that are more expensive (one expenditure is replaced with a more expensive expenditure, like your CAT scan.) This is the unit versus unit cost question.
Also, what about effect of malpractice claims and cost of insurance, and cost shifting? Any thoughts? Oh, and bureacratic costs of running routine care through an insurance company or HMO.
I'm not a hospital administrator, but I did stay at a Holiday Inn Express last night …
My guess would be that the threat of lawsuits biases diagnostic tests towards everything they can think of while insurance and government paybacks bias it in the other direction. A perfect storm would be to have the government mandate the best care for everyone while cutting payments to hospitals…