This has turned into another Year of the Uninsured. The PowerPoint presentations are being churned out almost as fast as a cable news commentator can form an opinion. Last week, the Federation of American Hospitals weighed in with a plan to have federal and state governments pay another $115.2 billion per year to cover people, while imposing a community rating on insurers. (As with all proposals, everyone but the sponsor is asked to sacrifice.) As encouraging as all of the attention to this issue is, and as much as it may be society’s obligation to provide basic coverage to all, universal coverage isn’t happening this year at the federal level. And I believe this to be a good thing.
Simply adding 47 million people to the current insurance system would cause costs to skyrocket far beyond current projections—which are dire enough—while not doing anything to make the care provided any better or more efficient. Although healthcare cost inflation continues to moderate, it will remain well above the rate of economic growth, and it’s building on a base that is already unsustainable. CMS projections call for spending to double by 2016 to $4.1 trillion, or nearly one-fifth of the U.S. economy.
Even in the short run, there is a fiscal straitjacket on Washington. This is why Democratic congressional leaders are focusing on expanding the State Children’s Health Insurance Program this year instead of taking up universal coverage. The latest plan for SCHIP would add about $12 billion annually to the baseline of about $5 billion per year, just to cover some of the 6.8 million children who currently qualify but have never been registered.
Complicating any proposal this year are new “paygo” rules that call for any new spending to be balanced by higher taxes (unlikely) or spending cuts in other programs. Toss in the cost of the Iraq war, additional new military spending and some other projected spending increases and there is no money for anything approaching universal coverage.
There are some coverage plans that include reforms of the healthcare system; personally, I admire the one put forth by Sen. Ron Wyden (D-Ore.). I believe that the balance has to shift toward reform first, then phase in additional coverage.
A new report by McKinsey Global Institute is the best expression I have seen of just how the U.S. spends so much to get so little value from its system of care. Reading it, you start to understand why it would be nuts to simply extend this system to all Americans.
Even after factoring in wealth and adjusting for things such as medical malpractice insurance and disease prevalence, we spend $477 billion more per year on healthcare than would be expected if the U.S. fit the spending pattern of other developed nations. Of that, $224 billion comes from hospital care, mainly in the form of higher prices and sicker patients, the result of healthier patients being steered to outpatient settings.
The results in the ambulatory setting are no better. Another $178 billion in excessive spending comes from overtreatment to ramp up reimbursement, while expensive technologies such as imaging machines are ubiquitous, but many often stand idle while still being staffed, maintained and amortized. Finally, we waste tens of billions of dollars as insurers try to find ingenious ways to wiggle out of paying and providers juggle dozens of different payment rates, forms and methodologies.
Universal coverage is, of course, the ideal, but it won’t be fiscally possible or responsible until we have found the will to make hard choices in making the healthcare system more efficient and effective. For that everyone has to sacrifice, including the reformers.
