Government payment for health care: the long view perspective

January 5, 2011  |  General

With all the arguing about how to pay for healthcare it’s useful to step back and take a long, comparative view. To do that takes both knowledge and experience. Victor Fuchs, distinguished professor of economics and healthcare policy at Stanford, has both of those qualities, and recently shared his perspective in an excellent editorial in the New England Journal of Medicine here. A simple graph serves as his reference point.

What the graph shows is that, since 1960, governmental payment for healthcare has been steadily increasing as private payment has been decreasing; in 1960 the split was 80% private, 20% government. The two are nearly at parity now, a 50/50 split.

Fuch’s points out that, although the government pays for half the care, it makes relatively little attempt to use that clout to restrain costs:

Thus, in one sense, Americans wind up in the worst of all worlds, with government bearing a big part of the burden of paying for health care, with the concomitant large burden of taxes, but exercising very little control over the cost of care. As an indication of how absurd the situation is in the United States, government currently spends more per capita for health care than eight European countries spend from all sources on health care.

One of my principal concerns with how we do things now is that I think insurance companies add a large measure of cost without adding much value. We simply cannot continue to devote the huge chunk of our GDP that goes to healthcare, a number that is steadily rising.

The solution will be a political one, as it should be. But people should look at Fuch’s simple graph and realize that government already is the largest single payer. Judging from the firestorm of rhetoric in the last election about keeping Medicare strong, I don’t see that changing.

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