Health care

What are we trying to do with !&#%&#$ health care... are you serious!

Perhaps we can take some of the emotion out of the health care debate by focusing on what we are trying to achieve and why. In an interview on March of 2010, CNBC’s Becky Quick interviewed Warren Buffett on health care. Buffett warned that “what we have now is untenable over time”. He argued that our health care costs have gone from 5 percent of GDP to 17 percent of GDP and this high cost paid by U.S. companies for their employee health care puts them at a competitive disadvantage. He compared the roughly 17 percent of GDP, spent by the U.S. on health care, with the 9 percent of GDP spent by much of the rest of the world; saying, “That kind of a cost, compared with the rest of the world, is like a tapeworm eating at our economic body.” The Gross Domestic Product, GDP, of the United States is roughly $13.85 trillion dollars. If we could reduce our health care cost to 9 or 10 percent of GDP, roughly in line with the rest of the industrialize countries, it would put just under $1 trillion dollars back into our economic system. But, as Buffett succinctly points out, “every dollar spent in health care has a constituency and the big dollars are organized and they’re not going to want to change”.

Insurers, attorneys, AMA, Hospitals, Universities, pharmaceuticals, unions, a host of cottage industries, entitlement programs, bureaucracies, and our political leaders, all have had a seat at the health care table. They have delivered a system we have asked them to deliver; high relative costs, limited access, while delivering high quality, with the flexibility to manage our own care. So, on balance, most citizens are satisfied with the care they personally receive. According to an ABC/Washington Post poll, for both insured and uninsured, Americans are positive about their personal experience with health care. A large majority of all Americans expressed satisfaction with the quality of care they receive, satisfied with their ability to see the doctors and top-quality specialists they choose, and a majority feel that they can receive the latest and most effective treatments.

It is interesting however, in the same poll, that while a wide majority express satisfaction personally with their own care, 54 percent of all Americans are dissatisfied with the overall quality of care in our country. This reflects the recognition that while they may enjoy high quality care, they know there are many who do not. As a result, a surprising 62 percent would support a universal system over a employer based system; not so surprisingly, only 32 percent would support it if it limited their choice of their doctors and there were waiting lists for non-emergency treatments.

If we don't begin working on cost however, we may not have a choice. While the relative current cost is high, it's the cost curve that's alarming. Health Care's rapid rise in cost, if left unabated, will consume much of our economic resources. The centers for Medicare and Medicaid Services shows that Health Care costs in 2008 surpassed $2.3 trillion dollars, more than three times the $714 billion dollars spent in 1990. The American Journal of Medicine reported that in 2007, medical debt accounted for a shocking 62 percent of U.S. personal bankruptcies and over three quarters of medically-related bankruptcies had health insurance. Millions of the uninsured, or under insured, citizens are statistically one accident or illness away from a similar fate.

When the Organization for Economic Co-operation and Development (OECD) compared the United States health care cost, as a percent of GDP and per capita expenditures, against Australia, Canada, France, Germany, Japan, Norway, Sweden, and the UK, our costs were the highest in all cases, with our per capita expenditure nearly twice that of all of them except Norway. The U.S. spending a third more than Norway. 18 percent of our overall government's spending goes to health care, the highest percentage of all the above mentioned countries, yet we only cover 45 percent of the overall cost of care. The countries above cover 67 to 83 percent of their overall cost of care. This again, suggests we are comparatively inefficient delivering health care, or more accurately said, we are inefficient at delivering health care competitively to the majority of our citizens.

Why has our free market system been unable to deliver health care with comparable costs to other Nations? Partly because our care is privately and publicly provided, and partly because it has never been our intent to competitively deliver Health Care to the majority of our citizens. We have asked our health care providers to deliver a highly responsive, high quality, and flexible system where cost and sell have virtually no relationship.

Health care is driven by need not economic demand, and health care insurance is the mechanism we use to pay for the services rendered; this creates an imperfect market. An imperfect market occurs when information, such as price, is not disclosed immediately to buyers and sellers so they can reach an agreement; this clouds value. In addition, markets driven by need, as opposed to economic demand, behave irrationally, meaning they do not follow typical or predictable market models such as price elasticity. This is where there is a predictable change in demand for a product or service when there is a change in price. So what does all this mean? Imagine the price you would be willing to pay for a cure for aids if you were HIV positive, a prosthetic leg if you lost yours in an accident, a liver for your dying son. The price of health care has some effect but it's difficult to predict when and how much.

Our alternative, in the United States, has been to deliver our Health Care through a quilt work hybrid system of the private and public sector working together, bound by federal and State regulation, with no consensus to improve access or reduce cost. Our government provides care through entitlements such as Medicare and Medicaid, which is paid through taxes or future debt obligations. In addition, health care is provided through public and private employers who, in the past, picked up the majority of cost, but the cost has been significantly shifting back to the employee to share in the burden. We also provide health care to those who are uninsured, or under insured, if needed, through emergency rooms, subsidized clinics, or simply by patients failing to pay for services rendered; these costs are covered by the public and private sector raising the price to the insured. We have gone long past the point of providing care as a safety net for those with no economic means. We fundamentally already have a universal health care system albeit a dysfunctional one. Is health care a right or a privilege to be earned, I'm beginning to believe the question is moot.

If we can keep focus on what we are trying to achieve, or better said, agree on what we are trying to achieve, perhaps we can align our citizens to reach an agreeable solution. We are spending more on health care, per person, than any country in the world. If we are going to provide a universal option, which again is something we are already paying for, we need to recognize it as such. But our unwillingness to work together is preventing us from working on cost and access, which by the way, are the two issues that could ultimately kill our economy, if not the patient, literally.

Whether the public or private sector delivers care is less important than who can deliver it most efficiently. Regardless, we need to put forward very clear objectives that are measurable. The four that come to mind are cost, quality, access, and the flexibility to manage our own care. These objectives must, at minimum, meet the average performance of selected industrialized nations. We have the largest and most effective market economy in the world. If we have an aligned, objectively driven strategy to address each of these issues, perhaps we can achieve the most effective health care system in the world. But first, let's just shoot for average.