The Crises in Health Care and Health Insurance in the U.S.
and Possible Solutions
February 20, 2007
SGE Evening Seminar
Review of Panel Discussion by David Auerbach, Congressional Budget Office; Molly Voris, National Governors Association;
and John Rother, AARP
This seminar featured a wide-ranging discussion of the problems with health care and health insurance in the United States. The U.S. lags a number of other countries in life expectancy and other health outcomes, while it far exceeds any country in per capita expenditure on health care.
David Auerbach began by noting that the U.S. spends about $2 trillion dollars annually on health care and health insurance, or about $6,000 a person on average. However, the expenditures are not spread evenly across the population. A high percentage of the expenditures are for medical care of a low percentage of patients.
While in 1980, U.S. health care expenditures as a percent of GDP were only slightly higher than that for European countries, since then the growth has been much more rapid in the U.S. than in Europe, and now the share of GDP devoted to health care is substantially larger in the U.S. than in any other country. Health insurance premiums have skyrocketed in recent years. Since 1998, they have risen 82 percent, compared to an 18 percent rise in average wages. A problem with medical care in the United States is that in the absence of a large monopsony purchaser of health care services (e.g. governments in most OECD countries), no one has a strong enough incentive or ability to limit costs, given that insurance pays most of the cost, with little out-of-pocket expense by the insured.
The number of slots in US medical schools has stayed roughly constant at 17,000 for three decades, despite a large increase in the U.S. population. In addition possibly raising costs through enhanced market power on the part of health care providers, a result of this restriction has been a poor quality of care in some dimensions. In the U.S., patients on average wait longer to see a physician when they are sick than in a number of other countries.
Molly Voris focused on initiatives states are undertaking to improve coverage and the quality of medical care. At least in part because of lack of leadership by the federal government, 19 states are considering initiatives to expand health insurance coverage. Massachusetts, California, Maine, Pennsylvania, and Vermont have proposed or enacted universal health care plans, while Illinois has proposed covering all children. One of the reasons for these state initiatives is that the number of uninsured are growing, having increased by 5 million over the past 4 years, and the Federal government has not taken the initiative in proposing viable solutions. Maryland lawmakers are drawing up ambitious proposals to provide medical insurance to the 780,000 uninsured--one in seven residents in the state.
John Rother listed aspects of U.S. health care that he characterized as the “dirty little secrets.” First, in spite of our expensive healthcare system, health care accounts for about 20 percent of illnesses, with environmental and life style factors accounting for the rest. Second, more health care does not mean better health care. In some cases, more health care procedures result in worse outcomes. Third, in spite of all the advances in medical care, medicine is an art, not a science. Fourth, there are huge variations in the quality of health care among doctors, hospitals, and especially across geographic regions. Fifth, the fee-for-service system has perverse incentives leading to too much medical care being provided.
Mr. Rother then provided a list of things he would do to improve health care in the United States. First, there needs to be universal health insurance, which can only be achieved by a government mandate. Second, to save money on health care and have better outcomes, more emphasis needs to be placed on prevention – for example, reduce smoking, and reduce consumption of transfats. Third, there needs to be greater investment in health information technology. This is not done currently because there is no financial benefit to doctors in doing so. Fourth, we need to have better case management of seriously ill patients, with one doctor or group of doctors having responsibility for the total medical care interventions that a patient receives. Fifth, we need to develop a better system for managing care for chronic problems, perhaps with greater involvement of nurses, and less reliance on 15-minute visits with doctors. Sixth, we need more studies of the comparative effectiveness of different therapies. For example, we often do not know if expensive new drugs are more effective than less expensive older drugs or generic drugs. Seventh, we need greater transparency of prices for patients. Patients often have little idea how much they will pay for the procedures they are having done. Eighth, the fee-for-service system is not providing positive outcomes because of their adverse incentives to perform unneeded procedures and ambivalence in containing costs.. Perhaps the fee should be paid for the management of a diagnosis, rather than on a-per visit or per- procedure basis. Ninth, people should not be bankrupted by their health care. Under the current system, this can happen even for people with health insurance.
Reported by John A. Turner
SGE Evening Seminar Committee