by Joseph Bast, Richard C. Rue, and Stuart A. Wesbury
The high cost of health care in the U.S. is the key issue in the national debate over reforming the nation’s health care system. Surveys show that the high cost of employee health care is among business; highest concerns. The promise of lower costs figured prominently in the American College of Physicians’ call in 1990 for a publicly funded “comprehensive and coordinated program to assure access [to health care] on a nationwide basis.” Critics of U.S. health care routinely focus on the system’s cost and point to European systems, where spending is much less.
Advocates of national health insurance and its twin, socialized medicine, have used the issue of health care costs to build a coalition for their cause. They promise substantial cost savings by adopting a “universal-access single-payer system.” One report even claims that the money saved by nationalizing the health insurance industry would be enough to extend health insurance to the entire population of uninsureds. Organized labor, the elderly, and even some parts of the business community have accepted this rhetoric and climbed on board the nationalization bandwagon.
Why should the advocates of nationalization be believed when they place blame for high costs on the health care industry, rather than on the many other factors that affect the cost of health care? At a time when “privatization” is taking place around the world and across the U.S., why should we believe that a centrally planned and tax-financed system will operate more efficiently than a private health care system?
This book takes aim at the health care spending issue. We ask why costs are high and how we know that spending is “too high.” We challenge the notion that countries with nationalized health care systems have controlled the cost of health care. And we suggest a reform agenda that addresses the real causes of unnecessarily high spending.
Although this book focuses on spending, it also addresses the related issues of access to care and cost shifting. These important matters would be resolved more easily if the problem of rising health costs were addressed successfully. Most of the discussion of these topics occurs in Chapters 4 and 5, and the solutions presented in Chapter 6 specifically address access and cost shifting.
In Chapter 1, meaning is sought for the phrase “too much” in the context of health care spending. How can spending levels in other sectors of the U.S. economy, in the past, or in other nations be relevant when the factors that must be “held constant” are so numerous and influential? Are estimates of health care spending and Gross Domestic Product (GDP) sufficiently accurate or comparable to allow for meaningful analysis? And what does it mean to say that spending on health care is “too high” when the benefits of spending are subjective—relief from pain, return to work, extended life—and therefore known only to individuals?
In Chapter 2 we set aside our objections to the validity of international comparisons and examine what data are available. Spending levels in the U.S. appear very high compared to levels in other nations, a finding already widely reported. But surprisingly, spending trends in the U.S. hardly distinguish it from other countries during the past 30 years. For example, Japan, Italy, France, and West Germany increased per-capita spending faster than did the U.S. since 1960, and Canada and Australia came within a few percentage points of the U.S. performance.
We then ask why health are spending in the U.S. is high. Too often in debates over health care policy it is assumed that high spending levels are necessarily bad. But what if there are legitimate reasons for high levels of spending on health care—reasons that would make the U.S. stand out as a high-spending nation even if our systems of delivering and financing health services were the most efficient in the world? Would it still follow that spending on health care is “too high” and should be reduced? The logical answer is no.
In fact, many factors explain why health care is more costly and spending levels higher in the U.S. than in other nations. Chapter 3 documents that wealth, geography, demographics, and public health problems in the U.S. are often without parallel in other countries. The U.S., for example, is geographically huge compared to European countries, its population is extraordinarily diverse, and its social and cultural heritage leads it to choose institutional forms that are much different from those selected in other countries.
The fact that health are spending is neither “out of control” nor entirely unjustified does not mean current levels of spending are acceptable. The market for health care in the U.S. is heavily regulated, profoundly influenced by government spending, and distorted by tax policies that cause over-reliance on health insurance. Chapter 4 describes how this pattern of government intervention has raised spending levels and reduced the efficiency of the U.S. health care system. We find that spending on health care would be substantially lower if government policies were changed, and on this basis we conclude that the U.S. truly does spend “too much” on health care.
Since the cause of overspending lies with government policy, legislation that attempts to assess blame on other parties will not lower health care costs. Unfortunately, such proposals dominate the current debate over health care policy. These proposals include national health insurance, managed competition, mandatory employer-provided insurance (“play or pay”), and socialized medicine. In Chapter 5 we survey these proposals and show how, because they have misdiagnosed the cause of the problem, they have no chance of being the cure.
There are better solutions to the problem of rising health care spending. Chapter 6 describes a plan developed by the National Center for Policy Analysis (NCPA) that would lower significantly the cost of health insurance for individuals and employers and allow individuals to pay small medical bills directly from Medical Savings Accounts. The NCPA plan gradually returns health insurance to its original function of insuring against unpredictable major health care needs, and away from its current, inappropriate role as a means for pre-payment of all routine health expenses.
By making individual consumers responsible for more of their health care spending, the NCPA plan touches off a chain of activity in the health care industry that places downward pressure on prices and upward pressure on quality. The difficult problems of access and cross subsidization are substantially, though not completely, addressed by this plan.
Chapter 6 also describes a series of reform proposals put forward by the American Legislative Exchange Council (ALEC) that would lower health care costs while also more directly access issues. The ALEC plan would repeal unnecessary regulation of the health insurance and hospital industries, reform medical liability, and privatize Medicaid through the use of vouchers. This series of reforms aims at the genuine causes of unnecessary health care spending in the U.S., and therefore promises to effect a genuine cure.
The final chapter of the book reminds us of what is at stake in the discussion of health care spending and suggests activities for persons who wish to become part of the national debate. Sources for more information about the NCPA and ALEC plans are presented as well as information about potential allies and resources.
Our findings and proposals are somewhat at odds with conventional wisdom. We believe this is because other researchers have fallen victim to three very attractive, but ultimately deceptive, assumptions: First, that high spending levels per se are indicative of a malfunctioning system; second, that standard measures of public health are accurate measures of the outputs of a nation’s health care system; and third, that a decentralized and competitive system necessarily is more wasteful and less efficient than a centrally controlled system. Much of this book consists of showing the error of these assumptions.
Details
May 1993
160 pages
ISBN 978-0963202727
Table of Contents
- Foreword
- Introduction
- Chapter 1: What Do We Mean by “Too Much”?
- Cost vs. Spending
- Measurement Problems
- Relevant Comparisons
- Subjectivity of Values
- How We Know Spending Is Too High
- Policy Implications
- Chapter 2: International Comparisons
- Percent of GDP
- Per-Capita Spending
- How We Compare
- Chapter 3: Why Health Care Costs Are So High
- Wealth and Culture
- Geography and Heterogeneity
- Sex, Crime, and Disease
- The Beginning and End of Life
- Technology and Law
- Can We Change?
- Chapter 4: Why We Spend Too Much
- Government Subsidies
- Taxation of Health Insurance Premiums
- Government as Regulator
- These We Can Change
- Chapter 5: Non-Solutions
- The Problem of the Uninsured
- National Health Insurance
- Managed Competition
- Mandatory Employer-Provided Insurance
- Socialized Medicine
- Conclusion
- Chapter 6: Better Solutions
- A Fresh Start
- The NCPA Plan
- The ALEC Plan
- Conclusion
- Chapter 7: Where We Go From Here
- What You Can Do
- A Parting Thought
- Endnotes
- Index
Availability
The book is available for purchase on Amazon.com.
You can also download a scanned PDF here.
