Category Archives: health care

How Can American Health Care be Reformed?

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The total cost of health care in the United States is roughly 18% of Gross Domestic Product, almost twice as much as for any other country in the world.  It is common knowledge that health care entitlements such as Medicare and Medicaid are huge budget busters for the federal government and are a big reason why it is so difficult to get government spending deficits under control.  But the cost of private health care is also increasing rapidly and is a big contributor to the stagnation of middle class income in recent years.  In other words, the exorbitant cost of health care has a negative effect on the entire American standard of living and the problem is just getting worse and worse.
Everyone who is concerned about this problem should read David Goldhill’s new book: “Catastrophic Care:  How American Health Care Killed my Father – And How We Can Fix It” and can start with his article in the September 2009 issue of the Atlantic Monthly. He has an approach which should appeal to liberals and conservatives alike.  All American citizens would be covered from cradle to grave but “health care is fundamentally best left to the market to maximize innovation, quality and efficiency”.  The basic principle is that insurance would only be used to cover real risk rather than the certainties of life such as routine illness and the infirmities of old age.
This ideal is accomplished with a “Balanced Health System: health accounts, health loans, and catastrophic insurance with a very high deductible”.  Of course it will be complicated to switch over an entire health care system to a new operating framework.  Of course there are thousands of details to work out.  Of course there will be strong criticism of any such concrete recommendation for radical change.
The point is that our current system is unsustainable.  Do we change it in a deliberate, rational manner or do we rather delay until a fiscal crisis of some sort occurs?  It is encouraging that our national leaders are working together on such issues as immigration reform and stricter gun control.  But our economic and fiscal problems are much worse and more urgent than these social issues.  We need leaders who have the vision and capability to move us forward on addressing our most fundamental problems.

Why Medicare is Such an Enormous and Urgent Fiscal Problem, II

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The National Institute for Health Care Management has just issued a report, “Health Entitlement Spending: A Story in Six Charts”, which describes in great detail why federal health care spending is such an enormous fiscal problem.  First of all, health care spending is already 21% of total federal spending in 2012.  This spending will more than double in the next ten years.  Annual Medicare expenditures are already double the revenue received from the Medicare Part A Payroll Tax and premiums paid by Medicare recipients.  This gap will continue to steadily widen in the coming years because recent retirees will only pay in total a small fraction of their lifetime benefits.
Every year since 2006, the Medicare Trustees have issued a determination of “excess general revenue Medicare funding”.  By law the President must respond by submitting legislation to correct the problem and Congress must likewise respond on an expedited basis.  But no corrective action has been taken so far.
All federal programs should operate efficiently and much can and should be done to achieve greater efficiency across the whole spectrum of federal programs.  But Medicare is the “sine qua non”, (without which, nothing) for spending reform.  Nothing else matters unless we can get Medicare spending under control.
One way would be to raise Medicare Part A taxes for everyone and also raise premiums for well-to-do Medicare recipients.  And then we’d still have to severely restrict Medicare benefits.  This would be drastic action indeed.
Another way is to give (refundable) tax credits to everyone who applies for Medicare and let them find their own insurance coverage on the private market.  This would create a huge incentive for recipients and their families to pay close attention to health care costs.
Each of the above alternatives would bring radical changes to our Medicare system.  But either we act now in a deliberate, and hopefully rational, manner or else our national debt will grow so rapidly that there will be a new fiscal crisis much worse than what happened in 2008.
Which of these three scenarios do we prefer?  Right now we have a choice!

Why Medicare Is Such an Enormous and Urgent Fiscal Problem

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An article in today’s (April 4, 2013) New York Times, “Misperceptions of Benefits Make Trimming Harder”, explains why Medicare is such an enormous and urgent fiscal problem for the federal budget.  The article points out that an average single male who retired in 2010 will receive more than $100,000 in Medicare benefits in excess of what he pays into Medicare in taxes before retirement and premiums while receiving benefits.  The gap is projected to grow for future retirees.  Too many people are not aware of this huge discrepancy between what they pay into Medicare compared to the benefits which they will draw out after retirement.
According to the reporter, Democratic leaders, including the President, are aware of this funding gap but are unwilling to discuss it publicly.  Instead they take the easy way out by criticizing Republicans who do want to address the problem in a responsible manner.
The problem is so serious that trims around the edges, such as means testing and/or higher premiums for affluent retirees, will not accomplish anything more than making a small dent in the funding gap.  Raising taxes will not get the job done either because they would have to go up too much and too often as the problem keeps getting worse and worse.
The only way to really solve the problem is to control the costs of Medicare (and more generally for all of health care).  There are two basic ways to do this.  One way is to have a government run single payer system with very strict rationing.  The other way is to make everyone, including seniors, financially responsible for their own health care, with subsidies for people with low incomes.
The challenge for Republicans is to frame this basic choice as clearly and vividly as possible.  The American people must come to realize that the status quo in health care cannot continue.  If this message can be delivered effectively to the broad public, I am confident that a majority of people will want a free market system with choice rather than severe government rationing.

Why is Healthcare so Expensive?

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Time Magazine has just published its longest article ever, a 25,000 word piece by Steven Brill, entitled Bitter Pill: Why Medical Bills Are Killing Us.  The article contains one example after another of outrageous medical bills being charged to people who are the least able to pay, either the indigent or the uninsured.  Mr. Brill’s solution to this horrible mess is for the government, i.e. the bureaucracy now being expanded by the Affordable Care Act, to do a much better job of using its clout to control costs.

But there is another point of view about what is wrong with our healthcare industry and what can and should be done to make it far more efficient and enable it to provide us with quality care at a much lower cost.  David Goldhill provides a roadmap to a consumer-driven healthcare system with his new book, Catastrophic care: How American Health Care Killed My Father and How we Can Fix It. 

Mr. Goldhill’s proposal is to introduce true competition, not quasi competition dictated by over-burdensome bureaucratic rules, into the American healthcare system.  In other words, let the marketplace figure out what works best by trial and error, rather than expecting even the brightest and most well-meaning experts to be able to figure it out a-priori.  There would still be massive government sponsored programs, such as cradle-to-grave catastrophic insurance and mandatory health accounts, to provide universal care for all.  But the myriad details would be left to the consumers and providers of healthcare to work out over time.

The healthcare crisis in the United States is not just about controlling the rapidly increasing costs of Medicare and Medicaid, as serious as this problem is.  It is also about controlling the costs of private healthcare which is retarding the growth of prosperity for the entire middle class.  Fundamentally we have two basic ways to proceed. We can either move toward a single payer government run program, like much the rest of the developed world, or we can set up a minimally controlled (to insure universal access) system where each of us has the primary responsibility for our own health.