|
Health Care Problems
Medicare
and Medicaid are federally funded health care programs. Medicare provides health
insurance for more than 40 million aged and disabled Americans, while
Medicaid is a joint federal/state program that provides health care
services for almost 60 million low-income Americans.8
All other Americans receive health insurance from their employer, or
they pay for it out-of-pocket as needed. Low deductible private health
care plans became prominent after the second World War when wages
were fixed by the government, and employers began offering health
insurance plans to attract potential employees. Government health care,
Medicare and Medicaid, was created in 1965 as an amendment to the
Social Security Act (1932). This is a unique system in the modern world.
Most industrialized
countries have a socialized health care system: the government
guarantees basic health care services to all, with the affluent having
the opportunity to pay out-of-pocket for expedited, specialized, or
higher quality care, often within the United States. The United
States’ own system jumbles private and federal health care together in a
effort to let free markets prevail while still providing for the
underprivileged. Private insurance companies avoid insuring high risk
individuals. These individuals are left to the care of the government,
while increases in government health care spending go unchecked. This
configuration creates inefficiency and waste which exacerbate the
national dilemma of rising health care costs per capita.
It is difficult to reign in
government health care spending, and this contributes to the deficit
Federal spending, such as for defense purposes, is
categorized as discretionary. Discretionary programs are funded
year-to-year at the will of Congress, and are usually subject to
extensive public debate. Medicare and Medicaid, on the other hand, are
entitlement programs. Entitlement programs guarantee specific benefits
to a segment of the population via a legislated formula. This means
spending on Medicare and Medicaid rise automatically to the health care
needs and demands of its enrollees, avoiding all together the political
process.
We spend more every year on health care not just overall, but per
capita
The yearly growth in the cost of the federal
health care programs is greater
than the growth of yearly GDP. The government spending on these
programs combined has risen from 1.0% of GDP to 4.1% of GDP between 1970
and 2004.
(Graph 2) Excess cost growth is the formal nomenclature for this condition. The
excess cost growth of health care is bad because it implies that
Americans are spending a higher percentage of their income each year on health care,
detracting from the consumption of other goods and services. Even if
health care spending were to rise at a somewhat slower rate that
historically (1% faster that GDP growth) the CBO projects that
current trends will lead to Medicare and M edicaid
expenditures reaching 21.9% of GDP in 2050
(It is important to note here that all government spending
currently represents about 20% of our GDP).
(Graph 3) While “impossible things are
indeed impossible, and therefore will not happen,” (Doug Hamilton of the
Congressional Budget Office, commenting on the potential for a health
care based economy in the US) one can grasp the result of excess health
care cost growth by trying to imagine that everyone’s job in the future
will have something to do with health care. Luckily, this trend is
“impossible” to sustain in the long-run. However, to avoid a painfully
abrupt shortage of health care services in the future, this issue must
be addressed immediately.
America's aging population, combined with its increased national life
expectancy, also
contribute to the cost growth of Medicare and Medicaid. There are more
elderly now than there have ever
been, and they are living longer on average than they did before. That
being said, aging is remains only a minor component of the cost growth;
we are spending exponentially more on healthcare per person each year.
Unlike most industries where technological innovations
decrease the costs of providing a service (think tractors and food
production), health care is unique in that new medical
innovations often increase the cost of keeping a population healthy. Neither doctors nor patients have strong incentive
to control costs. Doctors and/or their employers usually profit from
any test or procedure administered, and patients pay an average of only
seventeen cents of every dollar of health care the consume11,
the rest of the bill is picked up by insurers and government. Doctors recommend, and
patients request, unnecessary health care. The final, and a major, contributor to excess cost growth is
labor costs. Health care is a very labor intensive industry, and will
continue to be in the foreseeable future: we have yet to perfect a
machine that can fulfill even a few of nurses’ most elementary duties. As life expectancy rises and technology improves, people spend more time
in long term care facilities that are composed of high ratios of care
givers to patients.
Graph 2
Back to Text
Graph 3
Back to text
Click here to see
the solutions
|
