Thursday, June 25, 2009

Something’s Got to Give in Medicare Spending

Tyler Cowen writing in The New York Times:
MEDICARE expenditures threaten to crush the federal budget, yet the Obama administration is proposing that we start by spending more now so we can spend less later.

This runs the risk of becoming the new voodoo economics. If we can’t realize significant savings in health care costs now, don’t expect savings in the future, either.

It’s not the profits of the drug companies or the overhead of the insurance companies that make American health care so expensive, but the financial incentives for doctors and medical institutions to recommend more procedures, whether or not they are effective. So far, the American people have been unwilling to say no...

It sounds harsh to suggest that the Obama administration cut areas of Medicare spending, but, too often, increased expenditures and coverage are confused with good health care outcomes. The reality is that our daily environment, our social status and our behavior — including diet and exercise — have more to do with good health than does health care more narrowly defined.

The demand for universal coverage sounds like a moral imperative to “take care of everybody,” but in reality it would make only a marginal difference when it comes to the overall health of the American population. The sober reality is that universal coverage is another way to spend money, which may or may not be a good idea.

The most likely possibility is that the government will spend more on health care today, promise to realize savings tomorrow and never succeed in lowering costs. It is rare that governments successfully cut costs by first spending more money.

Mr. Obama has pledged to be a fiscally responsible president. This is the biggest chance so far to see whether he means it.
Read the whole thing.


thinking said...

Interesting article.

First, re the "financial incentives for doctors and medical institutions to recommend more procedures, whether or not they are effective:"
One aspect of Pres Obama's proposed healthcare reform is to make reimbursement more tied to results, not procedures, and so hopefully this will be addressed, at least in part.

Another reform is to focus more on prevention as well.

Second, I think Cowen is too generous in letting insurance companies and drug companies off the hook. For instance, the Columbia Journalism Review has an excellent interview with Wendell Potter, a former head of corporate communications for CIGNA.

The interview is very revealing of the practices of the insurance industry, and Potter admits that he left because he "didn’t want to be part of another health insurance industry effort to shape reform that would benefit the industry at the expense of the public."

In San Francisco, they launched the United States’ first universal health care program, Healthy San Francisco, and almost 70% of previously uninsured San Franciscans are now enrolled in our public program. They are providing health care at a cheaper rate than similar private care options.

The US does not have the best healthcare system in the world, only the most expensive. The current system does is not even close to being the best in terms of outcomes.

In actuality, the best healthcare systems in the world, overall, are single payer systems, and if we were starting from scratch, that would be the way to go.

And yes, universal health care is a moral issue.

thinking said...

Jay Rockefeller had some good quotes the other day:

"To me, there is nothing that ultimately makes more difference to Americans than health care.

"People often talk about 45 million uninsured Americans, but rarely mention the 25 million Americans who are underinsured."

Rockefeller estimates at least 100 million Americans face major problems paying for health care today.

Government-backed programs are big enough to bring medical costs down, Rockefeller believes.

"Back in 1993, all our Veterans Administration hospitals got together and agreed to buy prescription drugs as a group. The next week, the costs of those drugs went down by 50 percent."

"Today, the insurance industry runs this whole deal, spending $1.4 million every day to fight health-insurance reform. The government has a lot of power to lower prices," Rockefeller said....