Keeping Your Eye On The Ball

Published September 1, 2007

The American health care system has three fundamental problems: cost, quality, and access.

Cost: Health care spending per capita is growing at twice the rate of growth of national income. If that trend continues, health care will crowd out every other form of consumption by the time today’s college students retire.

Quality: RAND researchers find patients get recommended care only about half the time–and the type of insurance, or whether you have insurance, doesn’t seem to matter. An Institute of Medicine study found as many as 98,000 people die annually from medical errors. Other studies have shown an appallingly low percentage of doctors and hospitals have patient records in electronic form, thereby missing opportunities to use error-reducing software.

Access: Low-income people in particular–whether or not they are enrolled in government programs–face barriers to care. They have access to a limited range of doctors and clinics and often face rationing by waiting when they are not facing rationing by price.

No Solutions on Table

Now close your eyes and imagine every major health care reform you’ve heard about in the past 15 years, beginning with Hillary Clinton’s plan right up through Arnold Schwarzenegger’s plan for California. Do any of them promise to even dent our three major problems?

I would argue they do not. Here’s why:

Failing to Control Cost: If you agree that costs cannot be controlled unless someone is forced to choose between useful health care and other uses of money, there is no plan in sight that proposes any serious cost control. Even the managed care folks deny they ever block access to useful medical care. Socialized-medicine advocates deny there would be any serious rationing in the United States.

Many groups want to shift costs. But shifting costs is not the same as controlling costs.

Failing to Raise Quality: If you agree quality cannot be improved by telling doctors how to practice medicine, there is no plan that would cause any significant increase in the quality of care. Providers will not improve quality unless they compete on quality. Yet they will not compete on quality unless they also compete on price.

There is no reform plan yet offered that will cause providers to compete on price. (Managed competition encourages competition among health insurers but not providers, and the incentives to compete are perverse– actually encouraging plans to lower the quality of care to the sickest patients.)

Failing to Increase Access: If you agree that access is not improved by moving people from uninsured status into Medicaid and SCHIP, there is no plan on the table that will significantly increase access to care for low-income patients.

Health policy wonks often overlook the fact that Medicaid patients and the uninsured frequent the same clinics and hospital emergency rooms and basically have access to the same care. How else can you explain the fact that one in four uninsured could enroll in Medicaid but chooses not to do so?

The chief barrier to care for both groups is rationing by waiting. RAND found that once they see a doctor, the uninsured and Medicaid patients get roughly the same care.

Answers Forthcoming

Another problem with many reform proposals is that expansion of free, public insurance crowds out private insurance. John Gruber of the Massachusetts Institute of Technology estimates every extra $1 of Medicaid spending causes the private sector to contract by as much as 75 cents. For SCHIP, the crowd-out factor is 60 cents. And in general, moving from private insurance to Medicaid or SCHIP makes access worse, not better.

I realize there are those who will question the three assumptions behind these conclusions. Okay, but the burden of proof is on them, not me. (The person who proposes a change has the burden of convincing us the change is worthwhile.)

In the meantime, think about all the grandiose schemes for health care reform proposed in recent years. It is amazing how little confidence any of us can have that these reforms will actually solve any of our three most important problems.

Despair not. We will propose some workable reforms in columns to come.

John Goodman ([email protected]) is founder and president of the National Center for Policy Analysis.

For more information …

“Handbook on State Health Care Reform,”