US Health-Care Reforms: Cut Expensive Procedures/Prescriptions

I have no hesitation in admitting that I generally turn to The Economist when I am looking for details regarding any hot world issue, or if I fail to understand its different dimensions. This venerable British magazine has some interesting points to offer regarding the US health-care reforms.

“Because health insurance is so expensive, nearly 50 million Americans, an obscene number in such a rich place, have none; those that are insured pay through the nose for their cover, and often find it bankruptingly inadequate if they get seriously ill or injured.

“The costs of health care hurt America in three other ways. First, since half the population (most children, the very poor, the old, public-sector workers) get their health care via the government, the burden on the taxpayer is heavier than it needs to be, and is slowly but surely eating up federal and state budgets.

“Second, private insurance schemes are a huge problem for employers: the cost of health insurance helped bring down GM, and many smaller firms are giving up covering employees. Third, expensive premiums depress workers’ wages.

“This summer’s debate about health care may determine the success of Barack Obama’s presidency. What should he do?

“If he were starting from scratch, there would be a strong case (even to a newspaper as economically liberal as this one) for a system based mostly around publicly funded health care. But America is not starting from scratch, and none of the plans in Congress shows an appetite for such a European solution.

“America wants to keep a mostly private system—but one that brings in the uninsured and cuts costs. That will be painful, and require more audacity than Mr Obama has shown so far.

“A bolder president would start by attacking two huge distortions that make American health care more expensive than it needs to be. The first is that employer-provided health-care packages are tax-deductible. This is unfair to those without such insurance, who still have to subsidise it via their taxes.

“It also encourages gold-plated insurance schemes, since their full cost is not transparent. This tax break costs the government at least $250 billion a year. Mr Obama still shies away from axing it, as do the main congressional plans on offer; but it ought to go (albeit perhaps in stages).

“The second big distortion is that most doctors in America work on a fee-for-service basis; the more pills they prescribe, or tests they order, or procedures they perform, the more money they get—even though there is abundant clinical evidence that more spending does not reliably lead to better outcomes.

“Private providers everywhere are vulnerable to this perverse incentive, but in America, where most health care is delivered by the private sector rather than by salaried public-sector staff, the problem is worse than anywhere else.

“The trouble is that many Americans are understandably happy with all-you-can-eat health care, which allows them to see any doctor they like and get any test that they are talked into thinking they need. Forcing people into ‘managed’ health schemes, where some species of bureaucrat decides which treatments are cost-effective, is politically toxic; it was the central tenet of Hillary Clinton’s disastrous failed reform in 1994.

“But to some extent it will have to be done. There is solid evidence to suggest that by cutting back on unnecessarily expensive procedures and prescriptions, anything from 10% to 30% of health costs could be saved: a gigantic sum.

“But in the end it will be up to the private health-care system. One thing that should be unleashed immediately is antitrust: on a local level many hospitals and doctors work as price-fixing cabals. Another option, favoured by many Democrats and the president, is for the government to step in with a results-based plan of its own, to compete against the private industry.” More here…

“A poll carried out for The Economist by YouGov highlights Americans’ beliefs about the state of their system. Although 68% of them rate the care they receive as ‘excellent’ or ‘good’, 52% are dissatisfied with the quality in the country as a whole. Only 25% think the system works pretty well and requires only minor changes; 40% think fundamental change is needed and 29% think it should be completely rebuilt.

“After decades of failed attempts at reform, a consensus appears to be emerging in America around the principles needed for universal coverage. One likely change means a restructuring of America’s failed health-insurance markets. Firms are today allowed to pick the safest patients and reject the sickest.

“In future they will have to take all comers. Because this imposes unfair burdens on firms that attract lots of older or sicker people, reform is likely to include government-funded mechanisms for risk pooling or reinsurance. The Netherlands, in particular, uses such an approach.”

More here…

Here’s my earlier post on Health-care reforms…please click here…