Reducing cost is the central sales pitch of the White House.
Indeed, the four-letter word cost was mentioned 36 times at last Wednesday’s press conference and 71 times in the President’s most recent health reform town-hall.
How to do it? The President has proposed sweeping measures to increase the size and reach of Washington: establishing a government-run insurance to compete against private options, creating a committee to overlook Medicare expenditures and decide what’s worth paying for, funding comparative effectiveness research, etc. Though Democrats are eager to point out that they aren’t in favor of a British-style health-care delivery system, they are certainly drawing their inspiration from the governments of other countries. (Britain, for the record, has been funding comparative effectiveness research and using it in decisions for a decade.)
As Frum Forum editor David Frum notes: “The Obama administration’s big idea for saving money reduces itself to this – central command and control is so much more efficient than private competitive markets that simply by switching from one to the other they can save all the money they need.”
It’s as if no one in the White House has bothered to check if such measures have slowed health inflation elsewhere. Often, the opposite is the case. Britain, for example, has boasted annual growth in health spending as high as 7% over inflation this decade.
Consider OECD spending in health care (adjusted for inflation and currency).
Real Annual Growth Rate of Health Expenditure (Source: OECD)
AEI’s Andrew Biggs looks at similar data and reaches a similar conclusion. He compares health spending and GDP growth, concluding that: “U.S. health costs grew an average of 1.66 percent faster than the economy from 1990-2006, while the OECD average was 1.62 percent. Clearly, the U.S. has not had unusually fast health care cost growth over the last decade and a half.”
In a Forbes.com essay, I look at some historical spending data and mull a simple question: why aren’t countries with government-controlled health care – even with rationing – better at controlling costs?
But in terms of the present debate, that question is academic. The relevant question is this: if countries like Britain have failed to control costs with government health care, why does the Administration think that idea will work here?
11 responses so far
1 sinz54 // Jul 27, 2009 at 5:40 pm
“why aren’t countries with government-controlled health care – even with rationing – better at controlling costs?”
My guess: Because, being democratic nations, they cannot bring themselves to euthanize the elderly.
All Western nations are suffering from an increasingly aging population, due to longer life spans and women bearing fewer children.
And the older you are, the sicker you are. It’s as simple as that.
A breakthrough in curing chronic illness (say, a cure for diabetes or Alzheimer’s) would totally change the cost equations. That’s one of the reasons why stem-cell research is so exciting. For the first time, we may be able to regenerate diseased tissues.
2 SFTor1 // Jul 27, 2009 at 5:51 pm
The health care debate conducted in these pages is still fundamentally dishonest.
It’s a little disappointing, and a little disgusting.
We all know the facts haven’t changed: tens of millions without health care, children without health care, patients who have their insurance rescinded at the very moment they need it. People unable to buy health insurance the moment they have had a serious illness.
To defend this system is not something decent people would do. It is something people who have been bought and sold by special interests would do.
3 sinz54 // Jul 27, 2009 at 7:33 pm
sftor1 sez: “To defend this system is not something decent people would do.”
Polls show that the majority of Americans are satisfied with both the quality of their health care and the service provided by their health insurers. What they’re not happy about is the skyrocketing costs–the skyrocketing premiums, co-pays, and deductibles, for themselves.
You just let the cat out of the liberal bag, when you refused to include “rising cost” as one of your “facts” about the current system. All you care about is helping the disadvantaged. But polls show that most Americans with insurance care about rising costs for themselves, a lot more than they care about the disadvantaged going without insurance.
If liberals continue to advocate health care reform on the basis of humanitarianism rather than on the basis of sound economics, health care reform will fail. Even DailyKOS’s diarists are now admitting that.
Now: If you really want to lower health care costs, then you have to change the way health care–NOT just health insurance–is delivered in this country. You have to do away with fee-for-service medicine, and start paying physicians based not on the number of times they’ve seen a patient, or the number of tests they’ve ordered, but on whether they actually help patients get better, if at all possible within the state of the art. You have to increase the base of the health care pyramid (primary care physicians and nurse practitioners). You have to encourage the growth of medical groups, where each doctor within the group is salaried by the group.
And to lower the cost of Medicare, you have to raise the retirement age at which one can qualify for Medicare. It’s just crazy for the retirement age to be frozen since the 1930s, while the average life expectancy has increased by 15 years in that time period.
That is what the dialogue should be about: How do we keep health care from consuming an ever greater portion of U.S. GDP?
4 chephren // Jul 27, 2009 at 9:46 pm
“sftor1 // Jul 27, 2009 at 5:51 pm
The health care debate conducted in these pages is still fundamentally dishonest.”
Exactly right. David Gratzer’s statistics about medical costs appear to be so selective that they are meaningless. He neglects to mention the well-known fact that the US spends a far greater proportion of its GDP on health care than the OECD countries he mentions (virtually all of which have single-payer government health care), in some cases twice as much. This differential has persisted through the periods covered by the charts above.
Take a look at those charts in light of these facts. Gratzer “proves” only that the US health industry, as it is currently constituted, has no advantage in cost control over government-run systems. That’s not much of an endorsement of capitalist medicine.
Throughout the period Gratzer deals with, there has been no reduction in the massive difference between what Americans pay for health care and what single-payer countries spend. Where is the cost discipline inherent in capitalism?
Another cost issue Gratzer is silent on: the massive, and totally unnecessary overhead cost of “free market” medical insurance. Question to Gratzer: is this even included in the figures for health costs in the charts above? Americans throw away 30% or more of their insurance payments on office buildings full of adjusters, claim administrators, insurance company managers and other assorted gatekeepers whose job it is to deny service wherever possible. In Canada, the overhead cost of single payer insurance is less than 2%. Think about that for a second. More than 98% of Canadian health care dollars gets spent on actual health care. In the US? Try 65 %. That’s INSANE.
The biggest unacknowledged cost issue is in the nature of modern medicine. Medical costs tend to rise with time not just because of the aging population and lack of competition, but because medicine is not like other goods and services. New cures for disease are discovered all the time. They tend to add to the cost of care, not to reduce it. A new diagnostic test, a new drug for a hitherto incurable cancer, makes medicine more expensive. Nobody talks about this – capitalist medicine is assumed to be like the market for computer chips or transportation services, where innovation drives down costs. It isn’t. It’s a scientific endeavor – we want new cures and treatments, whether they are economic or not, because nothing is more valuable than health and long life.
The only way to contain cost is to deliver care in the most efficient way possible, with minimum overhead, and with a delivery method with cost containment – not profit – as its centerpiece. That’s single-payer. There is no other way.
5 SFTor1 // Jul 27, 2009 at 11:21 pm
“Sinz: You just let the cat out of the liberal bag, when you refused to include “rising cost” as one of your “facts” about the current system.”
Sinz, I didn’t refuse to include it, I just forgot. I agree that it is a major issue, as it unarguably is a massive burden on the business sector. No argument from me there, and neither on your suggested changes in the system to drive down cost.
I will point out to you that a system with a large number of uninsured, whom we end up treating in the emergency room for conditions that have become serious and chronic, is not only below us from a humanitarian point of view, but also adds significant expense to the system and puts an undue burden on local economies. I think you can safely add it to your list of approved ills the system is ailing from.
6 sinz54 // Jul 28, 2009 at 9:50 am
chephren sez: “That’s single-payer. There is no other way.”
Single-payer is off the table. Not even being proposed by liberals in Congress.
And if the moderate Dems have their way, your so-called “public option” (which is your attempt to foist single-payer on Americans without their knowledge or consent) is going to be off the table soon too.
7 Washington Planner » Tuesday Required Reading, 7/28/09 // Jul 28, 2009 at 10:32 am
[...] New Majority on the proven failure of health cost [...]
8 eberezin // Jul 28, 2009 at 10:41 am
Yes, the costs of most health systems are increasing rapidly. But that does not change the fact that our basic system of delivering care is much more costly than all the other in the developed world, and it also does not change the fact that fundamental changes in the way health care is organized and delivered in this country should be able to cut the cost of health care substantially. If other countries can deliver health care with outcomes as good as ours for 10 % of their (mostly lower) GDP, compared to the 16% of GDP that it costs us, then we should be able to eventually reduce our costs to that as well, and we must do it if we want to return to a robust, low-debt economy.
9 sinz54 // Jul 28, 2009 at 11:04 am
sftor1 sez: ‘I will point out to you that a system with a large number of uninsured, whom we end up treating in the emergency room for conditions that have become serious and chronic, is not only below us from a humanitarian point of view, but also adds significant expense to the system”
No it doesn’t.
Because the brutal fact of the matter is that the uninsured get only urgent care in emergency rooms. Emergency rooms cannot dispense the continuing care needed for chronic conditions. And yet continuing treatment of chronic conditions is the most expensive type of care. Take me for example. I’ve got kidney failure. But without insurance, I couldn’t get dialysis 3x/week in an Emergency Room–because Emergency Rooms don’t have dialysis machines. Nor could I get the testing needed to apply for a kidney transplant. An uninsured person who has arthritis can get painkillers from an Emergency Room, but not a hip replacement.
The way we’ve been rationing care to date is that the uninsured simply get less care, and they die sooner, relieving the cost to society. I agree that’s a humanitarian disaster for an enlightened society. But it sure has been cheaper than the alternative.
If you bring in tens of millions of the uninsured into the insurance system, and suddenly give them the kind of generous care that other Americans are accustomed to (including full prescription drug coverage, mental health services, and even hip replacements, in-vitro fertilization, acupuncture, and discounts on health club memberships), you’re going to send health-care costs through the roof.
There’s a reason why the health care reform package being considered by Congress now is going to cost America another trillion dollars.
10 ottovbvs // Jul 28, 2009 at 5:11 pm
…………what a joke……now were looking at healthcare growth as % of GDP growth……..any smokescreen to hide the fact that both in per capita and GDP terms we’re spending twice as much any one else in the western world and our growth in costs is twice there’s…….within 9 years on present numbers our healthcare bill is going from about 17% of gdp to around 24%………the uk’s increase over the past few years btw comes from a conscious decision to put more resources into healthcare as they were spending less than just about advanced members of the EU……..these are mickey mouse comparison and Gratzer knows it
11 chephren // Jul 29, 2009 at 2:58 pm
sinz54 // Jul 28, 2009 at 11:04 am
“If you bring in tens of millions of the uninsured into the insurance system, and suddenly give them the kind of generous care that other Americans are accustomed to (including full prescription drug coverage, mental health services, and even hip replacements, in-vitro fertilization, acupuncture, and discounts on health club memberships), you’re going to send health-care costs through the roof.”
You’re just ignorant. You shouldn’t even be posting here about single-payer or the so-called ‘public option”, you know so little.
I’m Canadian and have used single-payer health care in 3 provinces over the course of 40 years. I have never had full prescription drug coverage – I understand this is available in most provinces for seniors, sometimes with a co-pay of 20% or so. It is also generally available to poor people who can demonstrate hardship. Otherwise, it isn’t covered -many Canadians have supplemental drug plans through their employers (I have 80% drug coverage for necessary medications only, not things like Viagra – through my professional association).
In-Vitro fertilization? Not covered. Never has been.
Acupuncture? Not covered. I can get this through my supplemental coverage, along with massage therapy and chiropractic. Otherwise, it’s my dime.
Discounts on health club membership? Uh, no. Not covered. You’re being facetious, right? Obviously you have no desire to set your biases aside and look at single-payer objectively.
Mental-health services? Covered under single-payer, if it involves psychiatry. Therapy practiced by a psychologist is not covered by single-payer.
Hip replacements? Yup, covered. Why shouldn’t they be?
Other things that aren’t covered by public insurance in Canada:
- Dental
- Botox
- Cosmetic surgery
Compared to us, it’s the USA that has seen costs go ‘through the roof’. There is NO COMPARISON. Single-payer contains costs far better than the for-profit American industry – even on the narrow terms American conservatives are willing to debate. When you include the total cost of for-profit medical insurance – the $Trillions in medically-caused indebtedness, bankruptcy and foreclosure, the paucity and idiocy of the conservative anti-reform argument is revealed.
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