A grim diagnosis for our ailing health care system

A grim diagnosis for our ailing health care system
By Robert J. Samuelson - Washington Post
November 27, 2011

Even had it succeeded, the supercommittee would have failed. Ultimately, the only way to control federal spending and deficits is to suppress the upward spiral of health costs. These are already the budget’s largest single expense (27 percent in 2010, compared with 20 percent for defense), and their continued rapid growth, combined with the scheduled introduction of Obamacare, will soon bring them to nearly one-third. The supercommittee didn’t have the time or staff to solve a problem as contentious and complex as health care.

It remains urgent. Americans know that expensive medical care is squeezing non-health government programs and, through higher employer insurance costs, take-home pay. But they console themselves that U.S. health care “is the best in the world.” Among experts, this view has long been debated, but a new study from the Organization for Economic Cooperation and Development (OECD) in Paris suggests that the debate is over: It’s not true.

As societies grow wealthier, people want — and can afford — more health care. Still, U.S. health spending (about $7,960 per person in 2009) is in a league of its own. It’s 50 percent higher than Norway’s ($5,352), the next costliest. U.S. spending is more than double Britain’s ($3,487), France’s ($3,978) and the OECD average ($3,233).

Despite this, Americans aren’t notably healthier than people in other advanced countries, the study reports. Life expectancy in the United States (78.2 years) lags behind Japan’s (83 years) and the OECD average (79.5 years). It roughly equals Chile’s and the Czech Republic’s, says Mark Pearson of the OECD. Americans don’t have much to show for their system’s enormous cost, even if the gaps in life expectancy partly reflect differences in lifestyle and diet.

There are some bright spots. Cancer care is one area of superior performance; the five-year survival rate for breast cancer in the United States is 89.3 percent, while the OECD average is 83.5 percent. But the treatment of chronic illnesses such as diabetes and asthma may be worse. The U.S. rate of emergency hospitalization for asthma is three times that in France and six times that in Germany or Italy.

Indeed, by some indicators, Americans get less medical care than do people in other advanced countries. The number of practicing U.S. doctors (2.4 per 1,000 population) is less than the OECD average (3.1 per 1,000), as is the number of annual doctor consultations (3.9 per capita in the United States versus 6.5 for the OECD average).

What propels U.S. health spending upward? The OECD’s answer comes in two parts: steep prices and abundant provision of some expensive services. In 2007, an appendectomy cost $7,962 in the United States, $5,004 in Canada and $2,943 in Germany. A coronary angioplasty cost $14,378 in the United States, compared with $9,296 in Sweden and $7,027 in France. A knee replacement was $14,946 in the United States, $12,424 in France and $9,910 in Canada. Knee replacements in the United States were almost twice as common per 100,000 population as in the rest of the OECD. So were MRI exams and angioplasties.

This is a devastating portrait. At times, the U.S. health care system delivers the worst of both worlds: pay more, get less. Unfortunately, the message isn’t new. America’s fragmented and overspecialized health system maximizes returns to providers — doctors, hospitals, drug companies — but not to society. Fee-for-service reimbursement allows providers to reconcile their ethical duty (more care for patients) and economic self-interest (higher incomes). The more they do, the more they earn. Restraints are few, because patients and providers both resist limits on their choices. Government regulators and private insurers are too weak to control costs.

Countless thousands of conscientious doctors provide most Americans with good care and some with superb care. But the system needs a fundamental overhaul to deliver more value for money. There are essentially two ways to do this.

One is a voucher system that, through tax credits and fixed Medicare premium subsidies, would allow patients to shop for the best health plan. Competition, the theory goes, would force hospitals and doctors to restructure the delivery system; health plans would compete on the basis of price and quality.

The other way is a government-run, single-payer system that would — somehow — include strict budget limits on doctors, hospitals and other providers. Lower administrative costs alone wouldn’t provide enough savings to control overall spending. If open-ended reimbursement survived, so would the existing system.

What’s involved is transforming almost one-fifth of the U.S. economy. The supercommittee couldn’t do that. But it could have proposed legislation to create two teams of experts to design rival plans that would be ready for the next president. One way or another, if we don’t act, we’re surrendering our future to runaway health spending.