Posts Tagged ‘GDP’
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.
Much of the discussion about healthcare reform seems to presume that we need to break everything we have into little bits and start fresh. In a recent New Yorker piece, Atul Gawande points out the problems with this notion. At the most practical level, our medical care system (such as it is) needs to function 24/7, all the year round. We can’t just stop it for a while, put the whole country on hold, as we introduce a new way of doing things.
But beyond that, Gawande brings up another fascinating angle to the question. Anyone who has read about the issue knows that Britain, France, and Germany, for example, have established systems that differ from each other in fundamental ways. Only in Britain does the government run everything. Gawande asks the question: why have these countries done things differently? The answer, it turns out, is that each of them built upon the system (and citizen expectations) that already existed in that country. In no case did anybody tear down completely what was there and erect a totally new way of doing things.
Gawande concludes that whatever we do will necessarily be built upon what we already have. This will offend some people deeply, particularly partisans from both sides of the political spectrum. It will not at all be a system that a dogmatic purest of any ideological stripe would plan from scratch. Rather, it will inevitably be a series of compromises and tinkerings with the way we are doing things now. And we will need to be willing to trim our sails if needed, modify the system, when it is clear one or another aspect of it is not working.
Change will come, one way or another. We cannot sustain the rate of rise of medical care costs, which already consume 16% of our GDP, far more than any other nation.
The debate is on over this question: does the financial hole we’re in make any healthcare reforms unaffordable in the near term? Most observers say we’ve got two major problems to solve — access and cost.
Many Americans don’t have access to care, primarily because they don’t have any insurance. Estimates vary of exactly how many people this is, as do explanations for why they don’t have insurance. Free market conservatives assert that the number of uninsured Americans is manageably small. Further, they believe that for a significant chunk of these people the reason they don’t have insurance is because they choose not to buy it. The more liberal viewpoint, which I share, is that the number of uninsured really is at unacceptably high levels, and the reason it is that high is that insurance costs too much. This especially affects the self-employed, who must buy insurance for themselves, or those who work for small companies, which increasingly cannot afford to offer their employees healthcare benefits. Tying healthcare to employment, the standard way of doing things, causes major problems and inequities.
It is pretty clear, as became apparent in Massachusetts when they enacted their own healthcare reform, that increasing access to care caused an immediate torrent of pent-up demand from people who had been putting things off because they had no insurance to pay for it. So in the short term, at least, costs clearly go up when you increase access. But the alternative is clearly unacceptable, at least to me — controlling overall healthcare costs by denying access to needed care is an inhumane and shortsighted approach.
The rub, of course, is that as a society we ultimately must deny some access to care because we cannot afford it all. Healthcare costs already constitute a higher proportion of our GDP than any other country’s, and the trend is getting worse. The key is to eliminate payment for those things that don’t work. Most experts agree that a huge proportion of our healthcare dollars go for things of marginal or no benefit.
Since all this will cost money, should we put it off in these difficult fiscal times? No, says the Obama administration and many other healthcare wonks. Their idea is that reforming healthcare is intimately bound up with any economic recovery package. And just speaking politically, times of crisis have often been times when people are more willing to make dramatic changes in how we do things — ordinarily, we resist change, something even Machiavelli knew, and which has been called the “law of reform.”
One thing everyone agrees on is that our economy cannot sustain the amount of money we spend on healthcare. That was clear even before the Wall Street meltdown, and it’s even more true now. The United States spends 16% its gross domestic product (GDP) on healthcare, a figure half again that of the next highest spending country (Switzerland, at 11%). Most other European countries spend 9-10%. We also spend much more per capita than anybody else. (These figures are from 2003, but little has changed since then — if anything, it’s worse.)
Not only do we spend more than anybody else, but by many measures, as a society we get much less for our money. That is, in spite of our high healthcare bills, the United States does not compare well with other countries in many measures of health.
What’s to be done? How can we find ways to spend less on healthcare but get better value for our dollar? One answer is that much of the money we spend is on unproven or even worthless treatments. Many authorities advocate we establish an independent agency of some kind to evaluate which treatments work and which ones don’t. Britain already has such an agency, called the National Institute for Health and Clinical Excellence. The way it works is that patients and physicians are free to use a non-approved treatment, but insurance won’t pay for it. As you can read in the linked article, there are some vocal opponents to the agency, something probably inevitable. But in the words of its director: “We are not trying to be unkind or cruel. We are trying to look after everybody.”
Opponents of such a concept complain this represents rationing of health care, because inevitably it would mean that patients won’t get all they may want. This is true, but in fact we’re already rationing care; we just use a more insidious method. Anyway, what else are we to do? There is simply not enough money, especially now, to pay for everything. It’s time we recognize that. An independent evaluation agency of this sort would make the decision-making process transparent and fair.