There’s a genuine solution to our health-care problem
The Washington Post
April 29, 2018
No doubt about it: Health care is a vexing political problem.
There’s a contradiction at the core of our thinking. We want the best care when we or our loved ones get sick. It’s a moral issue. There should be no limits on treatment. But the resulting uncontrolled health spending harms the country. It undermines other priorities — higher wages (more labor income gets channeled into health-insurance premiums) and competent government (defense and other programs may be underfunded).
By and large, Americans ignore the contradiction. Presidents and Congresses have wrestled with it for decades without subduing it. The stakes are huge. Collectively, major federal health programs now constitute the budget’s largest spending item, more than $1 trillion in 2017, or 26 percent of outlays. In 1990, the comparable figures were $137 billion and 11 percent of outlays. Meanwhile, insurance premiums — often paid by employers — have jumped, as have deductibles.
What can be done?
Based on experience, it’s tempting to say “not much.” This may ultimately be the case. But a growing number of studies suggest some cause for optimism; health costs can be contained.
The relevant studies compare Medicare reimbursement rates with private insurance payments for the same medical conditions. The finding: Medicare pays less — much less. A 2017 Congressional Budget Office study found that Medicare’s average payment for a standardized hospital admission was $11,354 — 47 percent lower than insurers’ $21,433.
This research has two interpretations. One is that Medicare rates have been cut to artificially low levels. To replace lost revenue, doctors and hospitals must raise their charges on privately insured patients. The increases are passed along in higher premiums. There’s massive cross-subsidization of Medicare recipients by the working-age population.
Not surprisingly, the rival explanation denies Medicare’s role in boosting premiums. Instead, providers — mainly doctors and hospitals — get the blame. Their market power has increased. Hospitals have merged. Doctors’ group practices have grown larger or been sold to hospitals. Providers and insurance companies typically renegotiate premiums once a year. The fewer providers there are, the harder it is for insurance companies to dictate terms to the survivors.