Health care costs

In 2008, health care spending in the United States reached $2.4 trillion, and was projected to reach $3.1 trillion in 2012.1 Health care spending is projected to reach $4.3 trillion by 2016.

This spending represents about 17% of our GDP and by that measure exceeds all other industrialized nations. The question that we have to address is are we spending too much and are we getting sufficient value for the health care dollar.

Another factor we have to consider is that despite the massive amount of health care cost, many people do not have access to preventive health care and/or health insurance. Ignoring the fact that preventing a disease is much cheaper and more beneficial to the patient, we have a system that does not make preventive medicine a high enough priority.

Numbers are often thrown around about the number of uninsured. I was watching a show last night where one of the panelists argued that a certain number of the uninsured were uninsured by choice because they were young and did not feel the need for health insurance. This is probably true and that group is probably not a major health care cost driver, however, what has to be realized is that many of the insured are really underinsured in the event of a catastrophic event. The major cause of personnel bankruptcies in this country is medical costs (including long term health costs).

The system we currently have goes back to a paternalistic model that is breaking down. Most health insurance for people not eligible for Medicare is provided by their employers. This expense has increased tremendously over the years and has become a significant burden on many companies. Companies have been looking for ways to reduce costs and this has led to a greater shifting of costs to deductibles and co-payments and the use of HMOs.

Now, lets realize that the health care system does work fine for certain groups in this country. Most of those you see arguing the issue on TV are most likely fully covered. It should also be noted, that our system can and does provide excellent care for certain types of diseases and health emergencies. It often does this at a very high cost, but, if you are in need of an organ transplant and have money (ie Steve Jobs), you can probably use our health system to your advantage.

Of course, there are many more people who don't have those type of resources. The true crisis is the fact that so many Americans only receive health care on an emergency basis. Yes, if you show up in an emergency room with a health crisis, you will receive care. However, a lot of patients in emergency rooms wouldn't be there is they had access to routine health care.

So, I'm going to assume that we all agree that everyone should have the right to health care. The only question that remains is the best way to deliver it and how much involvement should the Government have?

I have trouble seeing how a system without Government involvement can work. If having health care requires a choice between paying a high premium and putting food on the table, the food on the table will win, since there is always a chance that you won't need health care. However, it would seem that the primary areas that the Government should get involved are in providing preventive health care and protection from catastrophic loss. Suppose that every citizen had a Government health care policy that entitled them to certain preventive care services. Treatment beyond preventive care would be at the patients expense up to some level after which catastrophic insurance kicked in? This would create a gap that could either be paid by the individual or could be filled by purchase of a supplemental policy.

The Government policies could be provided by private insurers who would compete for customers. So, assume the Government determined that insurers would be reimbursed $x per customer. The insurer would then compete for customers and if they were more efficient could offer slightly better benefits than their competitors. The only two things the Government would monitor would be that the benefits provided met the requirements and that the number of customers was accurate for reimbursement purposes.

Every American would have to choose their health provider or be assigned to a default provider through a random process.

This would provide universal coverage for the two areas that most need improvement, maintain choice and, I believe lead to a reduction in the increases in health care costs. Obviously, this system would have to be paid for via taxes, but these costs are being paid for already, so the percentage this represents would flow via the Government instead of the current method. Businesses wouldn't have to offer health care, or could offer supplemental packages as part of a compensation plan. Small business might benefit the most since they struggle to compete with large businesses in providing health benefits.

The increase use of preventive care this system would encourage should actually help to reduce overall cost although it would increase demand for certain services.