Legislation to overhaul the U.S. healthcare system hasn't emerged from congressional committees, yet it has gained enough momentum for the demonization of the reform effort to start in earnest. For example, Republican strategist Karl Rove called it "President Barack Obama's government-run monstrosity" in an Op-Ed article Thursday in the Wall Street Journal. Other Republicans, hewing to the rhetorical line drawn by consultant Frank Luntz, warn of a trillion-dollar "government takeover" of the healthcare system a la General Motors or American International Group.
The hyperbole reflects not just the political stakes involved, but the economic and personal ones. Healthcare is a $2-trillion industry, and improving its delivery is literally a matter of life and death. That's why the issue deserves a full-throated, no-holds-barred debate. As lawmakers spar over ways to improve the healthcare system, however, it's worth keeping in mind the broad agreement among doctors, hospitals, insurance companies and consumer advocates about what needs to be fixed, and why it needs to be done now.
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Rising costs
There are three fundamental and interrelated problems with healthcare in this country: It's too expensive, the results aren't as good as in other countries, and the insurance provided by government and the private sector leaves too many people uncovered.
The growing cost of care is the most pressing of these issues, despite the fact that it's not even remotely new. President Nixon declared a crisis in healthcare costs 40 years ago, when Medicare and Medicaid were still in their infancy. (Five years later, he proposed national health insurance.) According to the Committee for a Responsible Federal Budget, total healthcare spending has historically grown 2.5 percentage points faster than the economy. Healthcare already makes up 18% of the U.S. gross domestic product; if the trend continues, it will consume more than 30% of the economy in two decades. Such an increase poses a critical problem for government programs, especially Medicare, whose tax revenues are expected to fall short of its expenses within eight years.
Consumers feel the cost increase too, as a drag on their incomes. Those who receive health insurance from their employers are paying more for it through higher premiums and out-of-pocket costs, slower wage growth or both. According to a new report from the Bipartisan Policy Center, workers' monthly health insurance premiums grew almost 74% from 2000 to 2006, or more than six times faster than the U.S. median income. Of every $100 in payroll spending, $11 is diverted from paychecks into healthcare. Meanwhile, the increasing number of people whose jobs don't supply health insurance, including the self-employed, have to bear the full brunt of the higher costs.
The increase is being driven by several forces, some of which are easier to restrain than others. Continual improvements in technology, which have lowered costs in most other industries, have boosted them in healthcare. The typical insurance policy (government or private) pays doctors and hospitals for each procedure performed on sick customers rather than for keeping them well, encouraging the overutilization of expensive new equipment and in-patient beds. Those policies also make many consumers insensitive to the cost of their treatments, reducing the market pressure that limits the ability of service providers in other industries to raise prices. Persistent shortages of nurses, medical technicians and other healthcare workers have pushed up their wages faster than the typical employee's. At the same time, demographic and behavioral factors -- including an aging population and a high rate of obesity -- increase the demand for healthcare. Chronic diseases account for 75% of healthcare spending, and many of those stem from risky behavior.
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Questionable quality
Dedicating so much of the economy to healthcare might be acceptable if the investment yielded the world's best results, but it doesn't. Despite spending far more per person and a far higher percentage of GDP than any other country, the U.S. lags behind other industrialized nations on most measurements of healthcare. These include higher death rates from medical errors and treatable diseases, and higher infant mortality, according to a 2006 study by the Commonwealth Fund. Defenders of the U.S. system often argue that patients in other countries face lengthy delays for care, especially from specialists or for elective surgeries. But the Commonwealth Fund study found that, compared with several other countries, "U.S. patients are notably less likely to have rapid (same- or next-day) access to physicians when sick or to find it easy to get care after hours without going to the emergency room."
