The three days of arguments are over, protesters are going home, and the nine Supreme Court justices are left to decide among themselves what to do with health care reform. They’re expected to rule in June, but no matter what they decide, health care costs are not going to go down any time soon.
Whether the justices leave the Affordable Care Act of 2010 intact, take out the individual mandate, or throw the whole thing out, health care reform is a work in progress and will be for decades to come. Public and private spending on health care in the United States is $2.6 trillion a year—17.9 percent of gross domestic product, or $8,402 for every person. That’s 10 times as much as we spent in 1980. Yet we’re not getting our money’s worth. Americans can expect to live 78.2 years on average, below the Organization for Economic Cooperation and Development average and behind Portugal, Denmark, Slovenia, and Chile.
The health reform law keeps private insurers very much a part of the mix. And while Republicans don’t have a clear plan for what to replace it with if they repealed it—or if the Supreme Court strikes it down—the closest version gets private insurers even more involved. House Budget Committee Chairman Paul Ryan’s plan would turn Medicare into a voucher system in which people 65 and older covered by the plan would take federal money and use it to buy private insurance. They could stay in the current system, too, but the plan incentivizes the private option.
But it’s the private insurers who have put us where we are, with growing costs, an unhealthy population, and people unhappy with limits to their coverage. In fact, the single most popular health program is Medicare, which comes awfully close to the “socialized medicine” that conservatives decry.
The conservative retort is that it’s not private insurance that is to blame—it’s the unholy wedding of a public and private system. They argue that Medicare and Medicaid set norms such as reimbursement rates. Let the wise American consumer decide, they argue, and prices will have to go down.
It’s true that Americans like bargains—Wal-Mart and Target cash in on this tendency every day. But Americans also tend to believe that things that cost more must be better. Why else would “designer” clothes, shoes, and handbags cost 10 to 100 times as much as the cut-rate versions? Why else can Neiman Marcus hold its own against Target? Since 2001, premiums for employer-sponsored health coverage for families have risen 113 percent, according to the Kaiser Family Foundation and the Health Research and Educational Trust. That’s about four times the rate of inflation.
A telling study came out earlier this month in Health Affairs that strongly suggests this attraction of higher prices applies to health care, too. Judith Hibbard of the University of Oregon and colleagues gave volunteers a choice of various theoretical providers for some common medical procedures. When the only data given the volunteers was cost, they went for the priciest provider almost every time.
The International Federation of Health Plans reported earlier this month that Americans spend more for just about every medical procedure and doctor visit than patients in Spain, France, Germany, Argentina, Chile, Canada, India, and Switzerland, with one exception—cataract surgery costs more in Switzerland.
A hospital stay that costs an average of $1,825 in Spain or $5,004 in Germany costs more than three times that—$15,734—in the U.S. An appendectomy ranges from an average of $1,030 in Argentina, to $5,509 in Chile, to an average of $13,003 in the U.S. Drug and vaccine makers acknowledge that Americans’ willingness to pay more for their products allows them to discount elsewhere in the world.
Now, the health reform law is supposedly designed to help lower some of these eye-popping costs, with more government oversight of insurance premiums, payment reforms, comparable-effectiveness research, and competition on the health insurance exchanges. One reason prices are so high is that the patient almost never knows what something costs upfront, and often only learns if an insurer refuses to pay the full freight. But even some Democrats in Congress have rebelled against the Independent Payment Advisory Board—the panel of experts once derided as a “death panel”—which is supposed to step in if Medicare lets prices get too high.
Better coordination is supposed to help costs too, as are digital technologies such as e-prescribing and electronic health records. But some studies suggest these measures won’t lower costs and could bring them up in the short term. And just as the entire health reform law has been challenged, various aspects meant to control costs are certain to be attacked in Congress, probably piecemeal, just as IPAB was.
There is one easy solution to the issue—a single-payer health system that strictly controls costs and administrative fees, using evidence-based science to determine which interventions, drugs, and diagnostic tests are worth the money and effort. And that’s not going to happen any time soon.
This article appears in the March 29, 2012, edition of National Journal Daily.