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The Health Care Cost Problem


The Health Care Cost Problem

© Phil Hands, cartoonist

Does the United States need health insurance reform, or does it need health care reform? What the U.S. Congress enacted last year, the Patient Protection and Affordable Care Act is health insurance reform. Simple as that.

The PPACA sets up the individual mandate, medical loss ratio regulations, health insurance exchanges for the purchase of health insurance, and a myriad of other programs, regulations, etc. But as Ezra Klein states it in the Washington Post everyone knows — or should know — that the United States spends much more than any other country on health care. Given that everyone knows this, shouldn't we attack the root of the problem, shouldn't we be upset that we're not?

Let's dive in to the details. That's where the devil hides, right? The Kaiser Family Foundation has provided a great look at this when they broke the U.S, health care spending giant into two parts: the government’s share and the private sector’s share (both measured as a percentage of total gross domestic product), then compared the results to figures from 12 other countries that are members of the Organisation for Economic Co-operation and Development. As Klein points out, here's the shocking truth that they found: "Our government spends more on health care than the governments of Japan, Australia, Norway, the United Kingdom, Spain, Italy, Canada or Switzerland."

Yes, Canada. Yes, single payer health system Canada. That one.

Yes, the country that serves as exhibit 1A for socialized medicine, yes.... the United Kingdom. As Klein reminds us the U.K.'s system is not only the sole insurer of note but also employs most of the doctors and nurses and runs most of the hospitals. And yet, measured as a share of the economy, our government health-care system is the largest of the bunch.

Oh, but that's not the whole story. Doesn't the U.S. also have a private health care system? Yes, "atop our monstrous government health-care sector, we have an even more giant private health-care sector," Klein reminds us. "Altogether, we’re spending about 16 percent of the GDP on health care. No other country even tops 12 percent. Which means we’ve got the worst of both worlds: huge government and high costs," Klein concludes.

Reform Misses the Mark

The PPACA creates more bureacracy in the health care exchanges and increased regulations in an effort to expand access to the 48 million uninsured Americans. On the Medicare side it implements small pilots to study the Accountable Care Organization and Medical Home Models.

However, there's already evidence that those have worked-- improving efficiency, health outcomes, and reduced costs (Cleveland Clinic, ThedaCare, Mayo Clinic). So why not be more aggressive? This is where some Congreessional courage would have helped.

Then there's the Republican plan, which Klein says, "heads in the opposite direction: The GOP outsources Medicare to private insurers and gives senior citizens checks that cover less and less of the cost of insurance every year". That does nothing to get at the cost of care, in fact it exacerbates te problem as seniors retirement dollars are worth less and less each year in purchasing health care.

The GOP Alternative

In fact, here's what Paul Ryan, the Medicare reform Republican plan architect told Klein, “Our premium-support plan is modeled after the Medicare Part D prescription-drug program,” Paul Ryan (R-Wis.) argued. But Part D hasn’t controlled costs. Instead, premiums have risen by 57 percent since 2006, and the program is expected to see nearly 10 percent growth in annual costs over the next decade.

By the way, remember Medicare+Choice and Medicare Advantage? This strategy of using "market forces" to improve Medicare does not have a stellar track record.

Now, don't get me wrong, market forces could work, if they focused on controlling health care costs, rather than insurance costs. The GOP plan is focused on the latter, unfortunately. Revisiting the Democrats plan, their pilots due focus on health care costs but in a minuscule way.

Courage Needed

I call it courage, Paul Ryan calls it a "grown-up conversation". Either way, neither side has been wiling to tackle our main nemesis. Until we start implemeting true payment reform through either lean efficiency technigues, ACO development, Medical Homes, and episode of care reimbursement on a widespread basis; we'll contiue seeing healthcare AND health insurance costs spiral out of control.

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