Are we finally on the cusp of systemic change? If so, what might we be changing to, and when? Here’s our examination of healthcare’s biggest problems — and suggested fixes — from the top thinkers on reform, from all sides of the political spectrum.
The cost of care
Can we agree, to begin with, that American healthcare costs too much?
It’s certainly not hard to make this point: Healthcare expenditures, which have exceeded overall economic growth for decades, accounted for more than 16 percent of America’s GDP last year, according to the Centers for Medicare and Medicaid Services, a greater percentage than any other country. It is now the largest sector of the U.S. economy, by far.
And the projected growth trajectory of healthcare costs continues at an alarming rate: Costs will grow another 70 percent by 2015, when nearly one in five dollars Americans spend, or about $4 trillion, will be spent on healthcare. In 1980, this sector represented 8.8 percent of GDP.
What is going on here? Why is it so much more expensive to get healthcare in the United States than it is anywhere else in the West? Is it because we have “the best healthcare in the world”? Even if that’s true — and we won’t dispute it, though many have — does that quality difference account entirely for the spending disparity? Consider that in 2004, Americans spent $6,100 per capita on healthcare, compared to $3,000 in Belgium (to cite one example). Is healthcare so much better in Boston than in Brussels that it accounts entirely for the difference?
A recent PricewaterhouseCoopers (PWC) report estimates that $1.2 trillion of the total $2.2 trillion spent on healthcare in this country is wasted. The top culprits, according to PWC:
- Ineffective IT use;
- Claims processing;
- Defensive medicine; and
- Medical errors and poorly managed diabetes.
Not everyone pins the problem entirely on these usual suspects. “The major factor contributing to rising costs is the federal tax code,” says Greg D’Angelo, a policy analyst at the Heritage Foundation. Favoring employer-based coverage “has created a payer-centered healthcare system in America, [and] driven healthcare inflation,” he says. “Either the employers or the government own health plans. It’s not patient-centered, so it hardly resembles a market.”
Additional theories abound: Our pill-popping, fix-it-now culture; our shouldering of a disproportionate share of the world’s drug R&D budget (thanks to other countries’ pharmaceutical price controls); our outsized malpractice fees and awards, to name a few. But many ultimately point back to medicine’s dearth of market forces.
The Washington State Board of Health, in a 2006 report prepared for the Blue Ribbon Commission on Health Care Costs and Access, notes that “most economic sectors in the country rely on the markets to drive decisions — we expect the ‘invisible hand’ of Adam Smith to guide us — but in health care, there is no functioning market; the invisible hand is either absent from the picture, or as is more often the case, guides us in the wrong direction because of false incentives or disincentives.”
A consumer-directed approach
Many have had high hopes that so-called consumer-directed healthcare would solve this problem. Force people to spend more of their own money on healthcare, goes the thinking, and pretty soon consumers will start demanding efficiency.
Consumer-directed healthcare often takes the form of a high-deductible, lower-premium health plan coupled with a health savings account. The lower premiums are attractive to employers looking to cut costs and the tax advantages of health savings accounts, which can be used to fill the gaps in high-deductible coverage, are compelling to consumers.
Family physician Brian Forrest has built a successful practice around this theory. The solo physician quit accepting insurance of any type in 2002, and instead developed a prepay system that gives patients access to a raft of primary care services for $300 a year and $20 a visit. Forrest says his concept is cheaper for uninsured patients and even for some who are insured with high-copay plans, and is more lucrative and simpler for him.
He says he encourages uninsured patients to enroll, if possible, in high-deductible, low-premium plans with health savings accounts to cover major health expenditures like a hospitalization. Now he’s helping other physicians set up similarly styled cash practices. (Read his account titled “Cash-only Healthcare Still Works.”)