Healthcare “reform” … cost adders are certain … keep your fingers crossed re: the savings

Ken’s Take: For sure, 45 million uninsureds  will get government coverage. That includes 15 million non-citizens and 15 million healthy young adults who choose to self-insure now, but will be “mandated” into the program. The cost of adding these folks is a certainty.

What’s far less certain is whether any of the pie-in-the-sky cost reductions – most of which have been tried and failed in the past – will generate offsetting savings.

Still, no talk of real structural changes – e.g. free gov’t run Minute Clinics, tort reform.  Just “evidence based” veils being thrown over healthcare rationing.

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Excerpted from IBD, “Wrong-Way Health Care ‘Reform’ Could Actually Increase Spending”, June 12, 2009


The central cause of runaway health spending is clear. Hospitals and doctors are paid mostly on a fee-for-service basis and reimbursed by insurance, either private or governmental.

The open-ended payment system encourages doctors and hospitals to provide more services — and patients to expect them. It also favors new medical technologies, which are made profitable by heavy use.

Unfortunately, what pleases providers and patients individually hurts the nation as a whole.

That’s the crux of the health care dilemma .

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The Issue

No doubt the health program that Congress fashions will counter this reality by including some provisions intended to cut costs (“bundled payments” to hospitals, “evidence-based guidelines,” electronic record keeping).

But, the main aim of health care “reform” now being fashioned in Congress is to provide insurance to most of the 46 million uncovered Americans.

This is popular and seems the moral thing to do. After all, hardly anyone wants to be without insurance.

But the extra coverage might actually worsen the spending problem. How much healthier today’s uninsured would be with that coverage is unclear. They already receive health care — $116 billion worth in 2008.

Some is paid by the uninsured themselves (37%), some by government and charities (26%). The remaining “uncompensated care” is either absorbed by doctors and hospitals or shifted to higher private insurance premiums. Some uninsured would benefit from coverage, but others wouldn’t. Either they’re healthy (40% are between ages 18 and 34) or would receive ineffective care.

The one certain consequence of expanding insurance coverage is that it would raise spending. When people have insurance, they use more health services.

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Some Stats

A new report from Obama’s own Council of Economic Advisers shows why controlling health costs is so important. If current spending growth continues, the CEA projects that:

Health spending, which was 5% of gross domestic product in 1960 and is reckoned at almost 18% today, would grow to 34% of GDP by 2040 — a third of the economy.

Medicare and Medicaid, the government insurance programs for the elderly and poor, would increase from 6% of GDP now to 15% in 2040 — roughly equal to three-quarters of present federal spending.

Employer-paid insurance premiums for family coverage, which grew 85% in inflation-adjusted terms from 1996 to $11,941 in 2006, would increase to $25,200 by 2025 and $45,000 in 2040.

Full article:

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