IS HIGH COST ALL BAD?

Of course we’d all like to have the best services for the lowest cost.  The US does spend a lot on healthcare.  Do we get value for our money?  A July 26, 2009 Washington Post editorial stated, “The Congressional Budget Office estimates that new technology accounts for about half the increase in health-care costs over the past several decades.  This, for the most part, is a good thing.  Adjusted for inflation, health-care spending per person is six times what it was 40 years ago.  But no one today would settle for 1960s-style medicine.”

Supporters of government-run healthcare often hold up Canada and the UK as examples we should follow.  Here are a few facts from an OECD study which suggest Americans may be getting good value for money:

• The US has approximately 26.5 MRI machines per one million people, versus 5.6 in the UK and 6.2 in Canada (2006 data)
• The US has approximately 33.9 CT scanners per one million people, versus 7.6 in the UK and 12.0 in Canada (2006 data)
• The US performs 145 coronary bypass surgeries per 100,000 people, versus 47 in the UK and 91 in Canada (2004 data)
• The US performs 434 angioplasties per 100,000 people, versus 81 in the UK and 138 in Canada (2004 data)
• The US suffers 40 heart attack deaths per 100,000 people, versus 49 in the UK and 42 in Canada (2004 data)
• The US suffers 158 cancer deaths per 100,000 people, versus 176 in the UK and 169 in Canada (2004 data).  In fact, according to a study published in British medical journal The Lancet, the US has the best cancer survival rates in the world.

http://www.ncpa.org/pdfs/Canadian_UK_HealthSystems.pdf

Americans are also likely to have more privacy and more amenities when hospitalized.

Perhaps we should view the high cost of the US healthcare system as an engine of growth and innovation rather than as a burden.  The basic material needs of people are food, clothing, and shelter.  Americans have done very well for themselves meeting these needs.  Perhaps it is natural that society would next desire advances in healthcare… and be willing to pay for it.  Expected innovation from advances in stem cell, nanotechnology, and human genome research will undoubtedly improve American health in years to come – and also economic growth, exports, and prosperity – IF government does not intervene in the private sector.

CAN GOVERNMENT DO IT CHEAPER?

Those who support a government-run health plan often hold up Medicare – our largest existing public health plan – as an example of how the government can do healthcare more cheaply than private companies.  Here are some of their claims:

• They claim that the government has superior bargaining power that allows Medicare to achieve lower costs and that the government could achieve the same thing with a public plan for the general population.
• They claim that competition from a government-run plan would reduce private-sector health care costs by forcing private insurers to reduce costs.
• They claim that if the entire privately insured population were switched to a public plan, enough could be saved in administrative costs alone to insure all currently uninsured Americans.

The problem with these claims is that all are demonstrably false:

• Total per-beneficiary health care costs are growing faster for Medicare patients than for private insurance patients.
• Medicare’s per-beneficiary administrative costs are substantially higher than the administrative costs of private health plans.
• It is true we can probably save some money with electronic records and standardized claim forms, but the benefits are not great.  Claims processing accounts for only a small portion of administrative cost.   In 2005, Medicare spent $805 million processing claims, only 4% of Medicare’s administrative costs and a miniscule 0.23% (23 cents for every $100) of total Medicare spending.

http://www.heritage.org/Research/HealthCare/bg2301.cfm

Anyway, ask yourself what the federal government has ever done that was cheaper and more effective than private free enterprise?  Nothing springs to mind.

Massachusetts

Supporters often hold up the Massachusetts state government plan as a model for the rest of the country.  The plan was supposed to make health insurance more affordable, but according to a Cato study, insurance premiums have been increasing at nearly double the national average, and health insurance in Massachusetts costs an average of $16,897 for a family of four, compared to a national average of $12,700. (Source: The Freedom Workbench).

Healthcare reform in Massachusetts has also led to a shortage of doctors.  http://www.npr.org/templates/story/story.php?storyId=97620520

HIGH COST / BUDGET DEFICITS

Many who say we need healthcare reform say we need to do it to reduce the amount of money we spend on healthcare.  Question:  if the plan is supposed to save money or reduce costs, then why do we need to raise taxes to pay for it?  The fact is that the plans being proposed are expensive.  It’s also likely that the actual future cost will be higher than currently estimated.

Independent healthcare research organizations (Lewin Group, Health Systems Innovation, Brookings Tax Policy Center) have estimated the 10-year cost of the different plans to range from $1.2 to $6 trillion.  The non-partisan Congressional Budget Office (CBO) has estimated the costs of the current House and Senate bills as follows:

CBO estimates the 10-year cost of House Bill 3200 as more than $1 trillion.  Even after $219 billion of spending cuts and $583 billion of tax increases, the overall impact is to increase the national debt by $239 billion.  http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3200.pdf

CBO estimates the 10-year cost of the current Senate plan as almost $700 billion with an increase in the national debt of almost $600 billion.  One of the main reasons often stated as a reason why we need healthcare reform is that we have 46 million uninsured people, but this bill still leaves 20 million of the 46 million as uninsured!

http://www.cbo.gov/ftpdocs/104xx/doc10431/07-02-HELPltr.pdf

The cost of the healthcare bills currently being discussed is even worse in the years after the first decade.  The CBO estimates long-term costs of the House bill will increase 8% annually but tax revenue will only increase 5%.  This means the $65 billion budget deficit estimated for year 2019 will grow to $188 billion for year 2029!  (Source:  Wall Street Journal, August 6, 2009)