How to pay for health care that Americans want?
02 06 09 - 11:52
$2.5 trillion-plus question: How to pay for health care?
Americans want it all when it comes to health care - brilliant doctors, cutting-edge treatments, easy access to care and insurance coverage that pays all the bills.
Those in the business of health care want it all, too: big profit margins, hefty salaries paid to those at the top and happy shareholders.
The truth is Americans might not be able to have it all when it comes to health care - not without major changes. Not in the long run. Not without jeopardizing the federal budget and the health of the nation's economy. This country is on track to spend $2.5 trillion on health care this year and $5.2 trillion by 2020, which would consume 21 percent of the country's economic resources.
That expense is simply unaffordable for individual Americans, employers offering insurance coverage and taxpayers footing the bill for government coverage.
Former Comptroller General of the United States David Walker has repeatedly warned Congress about the need to control health costs. During a 2007 "fiscal wake-up tour," Walker told the Register that the cost of health care must be curbed to get the country on a sustainable fiscal course. "The status quo is not an option," he said.
Federal Reserve Chairman Ben Bernanke recently told members of Congress that reforming health care "is without a doubt one of the most important challenges that our nation faces.
So as Congress hammers out legislation to reform health care in this country, an obvious priority is figuring out how to pay for it all, which must include a combination of controlling costs and generating revenue.
Every proposal to do that is controversial: Close hospitals that serve few patients, such as some of those in rural Iowa. Pay drug companies less. Make changes that reduce profits in the insurance industry. Raise taxes. (Mere talk of that gets people organizing tea parties.)
But on something as important as providing basic health care to Americans, lawmakers can't avoid wading into the controversial. A few of the many ideas they should consider:
Change how doctors, other providers are paid
Many experts think the United States should move away from the fee-for-service payment system. Your doctor is paid a fixed amount for each service he or she provides you. Why not pay health professionals bonuses for high-quality care? Why not impose penalties when care is substandard? Why not prohibit payment for unnecessary services?
Reduce spending on end-of-life care
More than 25 percent of Medicare's budget is spent on end-of-life care. The national average spent on a senior in his or her final six months of life is $25,358.16. But such spending varies widely - from nearly $34,000 in New Jersey to about $17,500 in North Dakota, according to Dartmouth Atlas, considered one of the most reliable sources for health-care costs and outcomes.
Why does it cost so much more to die in some parts of the country than others? It comes down to choices. How many specialists does a patient visit? How many expensive treatments are tried? Should more extensive treatments be the focus rather than making someone comfortable? Studies show more spending neither increases life expectancy nor necessarily improves quality of life.
End-of-life spending is among the most difficult and emotional issues in health-care finance. When it's you or your loved one, you might want to exhaust every option that could extend life. Yet that's questionable from a fiscal perspective.
Spend health dollars on care, not paperwork
Doctors' offices employ many people whose sole jobs are to process paperwork - rather than care for patients. The hodgepodge of thousands of different insurance plans in the United States has created a system that is mired in red tape. Too many dollars are spent on "administration" - which includes the profits being realized in the private sector.
For example, the federal government pays private-sector insurance companies subsidies to offer Medicare Advantage plans to seniors as an option to traditional Medicare. Those plans cost 12 percent more than traditional Medicare, or a projected $54 billion more from 2009 to 2012, according to a government study.
William McGuire, former head of UnitedHealth Group Inc., one of the nation's largest health-insurance companies, earned $8 million one year in pay and bonuses. In 2006, it was reported that unrealized gains on his stock options totaled $1.6 billion. Meanwhile, the top administrator at the Centers for Medicare and Medicaid, which oversees health care for more than 90 million Americans, earns about $150,000 a year.
There's something wrong when the U.S. health-care system makes some private-sector companies and individuals rich while other Americans lack basic health care. True reform means spending more health dollars directly on caring for people.
Make tax-code changes to pay for reform
In December 2008, the Congressional Budget Office released an evaluation of 115 health-care proposals to determine potential cost and savings of each. For example, imposing excise taxes on soda and increasing taxes on alcohol could generate more than $100 billion over 10 years - with perhaps the added health benefit of discouraging people from over-indulging.
But that's a relative pittance when annual costs are measured in trillions. This country can't nickel and dime its way to a steady source of revenue to fund health care. Significant tax changes must be considered.
A May 20 report from the Senate Finance Committee offered lawmakers some options for changing the tax code to help finance reform.
On the table are changes to health-related tax breaks that result in nearly $200 billion in uncollected revenue by the government each year. These tax breaks account for more than 17 percent of all federal tax breaks, "larger than capital gains and dividend tax breaks, retirement security and housing, among others," according to the report.
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The bottom line is there is no free ride in health care. Paying for it - for today's Americans and future generations - is going to require difficult decisions about spending less, spending smarter and generating revenue. That might anger some special interests and voters. But it needs to happen.