Health Care Reform and Fiscal Responsibility

Health Care Reform and Fiscal Responsibility

    Robert A. Levine, MD

    Federal spending will outstrip revenues this year by $1.7 trillion according to the Congressional Budget Office, the result of programs to combat the nation’s economic morass, including the stimulus package, the bank bailouts, rescue of the automakers and other actions. This is the largest deficit since World War II and represents about 12% of America’s GDP. The national debt will hit $12 trillion this year and continue to rise, with interest payments alone costing $565 billion. Estimates of the cumulative federal budget deficits for the next decade run between $4 and $10 trillion. With a wave of anxiety about heightened federal spending rippling across the nation, this would appear to be an inopportune moment to propose further expenditures for health care reform. Indeed, opponents of the major reform initiatives, including stakeholders in the system and free market advocates, have stoked this unease, emphasizing the adverse effects a trillion or more extra dollars for health care might have on the nation’s long term financial stability. And scare tactics used to sway the public and legislators against tampering with the health care system warn about “socialized medicine” and government control of medicine, about disruption of doctor-patient relationships and the inability of patients to get timely care. The repetition of these unsettling predictions reinforces people’s natural aversion to change, favoring a continuation of the status quo.

    What these adversaries to reform have neglected to mention is that the current system is inordinately costly and doesn’t work; that health care spending now consumes 17% of America’s economic output and is still climbing; that the unfunded liabilities of Medicare and Medicaid (obligations of the federal government and the taxpayers) are estimated to be in the trillions to tens of trillions of dollars; that over 60% of personal bankruptcies are due to medical debts; that the legacy costs of America’s businesses (mainly health care obligations) make them less competitive and contributed to the downfall of U.S. automakers; that Medicare’s hospital trust fund is projected to go broke in 2016; that continued unfettered health care spending will lead to disastrous economic consequences. And that in spite of all the money spent, America does worse than virtually every other developed nation on outcome measures (such as life expectancy and infant mortality).

     There is no question that major changes to the health care system are required. It is also well known (but unmentioned) in Washington that reform with universal coverage could be realized without any additional spending by the federal government, businesses or individuals, and without any tax increases, if legislators were willing to take on the stakeholders and free-market proponents. (This would also curtail runaway costs.) Unfortunately, the modifications needed to accomplish these goals have not been included in the proposals so far being considered. The Senate and House committee members who are involved have been focusing on measures they believe are politically attainable, not those that will best solve the existing problems and guarantee future viability for the health care system. In fact, the plans being entertained will undoubtedly require major revisions at some point down the line. (It has been rumored that the president and Democratic leaders are so driven to have health care reform enacted, they would be willing to settle for a flawed program.) The debates by legislators over how to pay for reform and whether to have a public plan competing with the private insurance companies fail to adequately consider cost constraints and overlook a source of funding that is right before their eyes; the health care system itself.

    A position paper by the Congressional Budget Office last year noted that approximately 30% of health care spending, about $700 billion, was consumed by unnecessary care. And between 15% and 25% ($440 billion at 20%) goes for administrative costs. Unnecessary care is driven by the financial incentives physicians have to increase the volume and intensity of their services. The more procedures and tests they do, the higher their incomes are. Whether or not they are ethical practitioners, it would take saintly individuals to ignore these financial rewards when making decisions about patient care. (Defensive medicine, ordering tests to protect against malpractice suits, and inadvertent duplication of tests, also play a small role in unnecessary care.)

    If reform legislation aggressively attacked unnecessary care and health care’s administrative costs, universal coverage and restructuring of the system could easily be paid for without additional funding. It would be a win-win situation for both the federal government and health care consumers, though some stakeholders would suffer losses (the same stakeholders who have been responsible for the calamitous escalation in health care costs). In these economically turbulent times, fiscal responsibility demands that funding for health care reform come from waste within the current system and that reform measures control future cost inflation. No new taxes would be needed and there would be no increase in the budget deficit if comprehensive reform were financed in this fashion.