Health Care Reform Debate

Health Care Reform Debate

The government health care debate is one of the most discussed topics right now, as president Obama made it a major issue of his platform and has carried through with placing it as a high priority. He had pushed for congress to deliver him a bill before the fall congressional recess (going on now), but this was not achieved. It has become a flash point topic, encompassing individual views on:

1. Whether health care is a right or a privilege.
2. The role government should play in health care.
3. The ability, or lack thereof, of the government to provide quality health care insurance efficiently.
4. Whether or not the government wants to take over health care.
5. Whether a single payer plan should be on the table.
6. The quality of government run health care in other countries.
7. The equating of government health care to socialism.
8. Whether or not private industry can ethically deliver health care.

I am attempting to educate myself on the costs of our health care system and hope to share here what I have learned. I will provide references to sources and my goal is to distill the information in the hope that readers will be able to get a somewhat concise overview of the information, while being able to follow the references for two reasons: to fact and conclusion check, and to dig more into the topic.

Before diving in to the topic, I clearly and proudly state first that I am a liberal. To me, this label means that I believe a share of the wealth of our country--which these days means a share of the deficit we choose to spend now at a cost we will pay later--should be spent to provide a minimum quality of life to members of every income strata in our country. I do not oppose personal wealth, but I oppose personal wealth at the exclusion of this minimum quality of life. Given that the wealthiest 20% of families in the United States owned 84.6% of the country's wealth, according to:

http://www.faculty.fairfield.edu/faculty/hodgson/Courses/so11/stratification/income&wealth.htm

I do not believe it is an unfair burden to believe that some of this wealth should be redistributed to help the poorest 20% of the population. I believe it is more important that we as a society provide health care, for example, to help someone making minimum wage fight cancer with chemotherapy, radiation, or whatever treatment is appropriate, than it is to allow our wealthiest to hold that money in their bank account or real-estate investments, or to spend on their third sports car of choice, for example.

This belief pervades my opinions on health care. Even if you do not agree with it, I hope that the information here will stand on its own to provide insight into the health care situation in our country.

QUALITY OF CARE
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While many people in this country enjoy high quality health care, I am not sure that the following is a well known fact: the World Health Organization ranked us 37th in quality of health care ( http://www.photius.com/rankings/healthranks.html) and 24th in life expectancy (http://www.photius.com/rankings/healthy_life_table2.html). This data is from 2000, the last year the WHO produced such data. At that time, the U.S. spent more than any country, as a percentage of gross domestic product, except the Marshall Islands (who were 141st in quality of health care--at least we outperformed somebody) :

http://www.photius.com/rankings/total_health_expenditure_as_pecent_of_gdp_2000_to_2005.html.

A further statistic where we fall far down on the list is in infant mortality, where 32 countries have better live birth to death ratios (http://en.wikipedia.org/wiki/List_of_countries_by_infant_mortality_rate).

By comparison, France--often vilified for providing poor quality socialist medical coverage, but only through anecdotes--was rated as having the best quality of care, had the 3rd longest life expectancy, and was number 10 in health expenditures as a percentage of GDP.

All this is to say, the United States spends more of it's wealth on health care than any other country in the world, yet we're not in the top 10, nor even the top 20 in terms of quality of health care. With regard to life expectancy, I personally believe this is also largely influenced by diet, but a discussion of trans fats and high fructose corn syrup, while related to the general topic, is too distracting in this post.

PRICE OF HEALTH CARE IN THE U.S.
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So far, the discussion has related the cost as a percentage of GDP. Wikipedia quotes health care costs in the United States in 2007 at $2.26 trillion (reference 1). I now copy in its entirety the information on the President's budget for 2008 from Wikipedia ( http://en.wikipedia.org/wiki/2008_United_States_federal_budget):

Begin Wikipedia Copy and Paste
---------------------------------

The President's budget for 2008 totals $2.9 trillion. Percentages in parentheses indicate percentage change compared to 2007. This budget request is broken down by the following expenditures:

• Mandatory spending: $1.788 trillion (+4.2%)
  • $608 billion (+4.5%) - Social Security
  • $386 billion (+5.2%) - Medicare
  • $209 billion (+5.6%) - Medicaid and the State Children's Health Insurance Program (SCHIP)
  • $324 billion (+1.8%) - Unemployment/Welfare/Other mandatory spending
  • $261 billion (+9.2%) - Interest on National Debt

• Discretionary spending: $1.114 trillion (+3.1%)
  • $481.4 billion (+12.1%) - Department of Defense
  • $145.2 billion (+45.8%) - Global War on Terror
  • $69.3 billion (+0.3%) - Department of Health and Human Services
  • $56.0 billion (+0.0%) - Department of Education
  • $39.4 billion (+18.7%) - Department of Veterans Affairs
  • $35.2 billion (+1.4%) - Department of Housing and Urban Development
  • $35.0 billion (+22.0%) - Department of State and Other International Programs
  • $34.3 billion (+7.2%) - Department of Homeland Security
  • $24.3 billion (+6.6%) - Department of Energy
  • $20.2 billion (+4.1%) - Department of Justice
  • $20.2 billion (+3.1%) - Department of Agriculture
  • $17.3 billion (+6.8%) - National Aeronautics and Space Administration
  • $12.1 billion (+13.1%) - Department of Transportation
  • $12.1 billion (+6.1%) - Department of the Treasury
  • $10.6 billion (+2.9%) - Department of the Interior
  • $10.6 billion (-9.4%) - Department of Labor
  • $51.8 billion (+9.7%) - Other On-budget Discretionary Spending
  • $39.0 billion - Other Off-budget Discretionary Spending

---------------------------------
End Wikipedia Copy and Paste

So, as a nation, we spent $2.26 trillion on health care in 2007, while the federal government spent $2.9 trillion in 2008. To say that health care is big business is an understatement. The Wikipedia page on health care in the U.S. (ref1) states, "Reports on the percentage of costs that go to profits varies from 25-30%." Using the lower value, $565 billion is being made as profit by the health care industry. By comparison, the health care industry's profit exceeds the United States defense budget by $83 billion. One now starts to see why the health care industry is lining up solidly to fight any change in the status quo. If you're making more money IN PROFIT than the U.S. spends on its military, well that's something worth fighting for.

Given the sheer size of the health care budget, it is easy to see why people on both sides of the isle in congress are acting with full intention now that the health care issue has become a debate, rather than a campaign talking point. As congress is now in recess, and representatives return home, the public town halls being held by said reps have health care as the front and center issue. As it is an emotional issue, as well as a political and fiscal one, for many people, such meetings have already been the site of arrests and fist fights ( http://www.youtube.com/watch?v=zTXBOgPCh9w&feature=channel_page ). With all this intensity on the issue, I think it is incredibly important to wade through bogus arguments and stay focused on the realities of our health care system and our goals for its improvement.

In 2007, Wikipedia states that nearly 46 million people were uninsured for at least part of the year (ref 1). 9.7 million of those are listd as non-citizens. Further, Wikipedia states, "It has been estimated that nearly one fifth of the uninsured population is able to afford insurance, almost one quarter is eligible for public coverage, and the remaining 56% need financial assistance (8.9% of all Americans)." That means roughly 26 million people in the U.S. cannot afford insurance and require assistance to do so. Given the cost of health care per person was listed at $7,439, one can estimate that roughly $192 billion is required to pay for health care for those who cannot afford it. Where this money will come from is a hot topic of the current debate.

SOURCES OF EXCESS SPENDING
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Some people that I've talked to who don't believe the government should have a role in health care have posited that we should first try to recover some of the waste in health care and use that to help pay for covering the uninsured. Others, of course, believe being uninsured is the uninsured's problem. But certainly with a budget of this magnitude, the waste will add up to large dollars. The CATO institute has a paper looking at the cost to benefit ratios of various government regulations on the health care industry that covers much of this topic:

http://www.cato.org/pubs/pas/pa527.pdf

The author, a Duke University Professor, attempts to compare the cost imposed on business and consumers due to government regulation to the financial benefits reaped. The author has much leeway in how he computes the values, but does attempt to spell out the basis for his decisions. He concludes that the cost of health care regulation to the consumer and business is $339.2 billion, while the benefit to same is estimated at $170.1 billion. This leaves a net cost due to health care regulation of $169.1 billion. This is about 7.5% of the health care budget and not an insignificant amount. He lists the medical tort system (the ability of people to seek a judgement for malpractice, for example) as the highest offender at approximately $80 billion. By contrast, the requirement that hospitals provide emergency room care and community service care, totals just less than $7.5 billion.

The National Coalition on Health Reform cites a study by the Institute of Medicine that states hospitals provide $34 billion in uncompensated care, and another $26 billion is paid out of pocket by the uninsured ( http://www.nchc.org/facts/coverage.shtml ). This total of $60 billion spent more closely matches the maximum value that the CATO study predicted, rather than the expected values used to come up with a $7.5 billion loss.

In the discussion on tort reform (reigning in legal costs due to malpractice), the author discusses the defensive medicine practices that are induced by the current system, e.g. doctors having testts performed not because they think they are useful, but rather because performing the test will protect them legally. The author states the following, "In New York, a multivariate analysis
showed that the medical malpractice system reportedly deters 28.8 percent of all malpractice,
but this estimate was not statistically significant,possibly due to small sample size." (his reference 67). "The ratio of negligent injuries to negligent deaths was 2.9:1 in New York" (his reference68) "but was 10.4:1 in a study of Colorado and Utah." (His reference 69). Earlier in the article he claims that it is widely accepted that 10's of thousands die annually due to medical malpractice. If one assumes the number of deaths is 20,000 (tens of thousands is rather ambiguous), and that 28.8% of malpractice is deterred, and that 1 out of 3.9 of those deterrences were a deterrence of death, then the number of lives saved is on the order of:

20,000 x 0.288 x 1/3.9 = 1,477 lives saved.

If I divide the $80 billion that lack of tort reform is supposed to cost us by the number of lives saved (this doesn't include the greater number of people who are not injured or impaired due to the extra testing), I come up with the cost of saving each of those lives: $54 million.

The above is based on a lot of loose numbers, in my opinion, but certainly the cost of maintaining malpractice insurance and calling for defensive procedures, rahter than those that are based on the doctors assessment, is significant.

Interestingly, Obama's original choice for Health and Human Services secretary, Tom Daschle, claims there is $600 to $700 billion in defensive care ( http://content.usatoday.com/communities/theoval/post/2009/06/68120137/1 ). This is quite a huge number and off by the CATO paper's estimate by a factor of almost 10. I find it hard to believe that 30% of the health care budget is being spent on unnecessary testing, especially when Wikipedia (ref 1) lists diagnostics as 23% of the health care cost. Given Tom Daschle's close ties to the health care industry as a lobbyist (part of the reason he is not Health and Human Services secretary), I conclude that this number is grossly inflated.

Medicare fraud is another topic that's been shared with me. One article quotes the cost as high as $60 billion ( http://www.msnbc.msn.com/id/22184921 ). A house hearing of the Energy and Commerce Subcommittee resulted in federal officials stating that billions of dollars in fraud are perpetrated agains Medicare ( http://www.medicalnewstoday.com/articles/68371.php ). So, the number may fall between say $3 billion to $60 billion and is another that is hard to tie down. Whatever the true number, it seems that there is much waste to be reclaimed by putting more law enforcement energy (and dollars) into the problem.

Sadly, the $7.5 billion spent on caring for the uninsured is a very ineffective way to help them. I will concede, however, that it is a much lower cost thant the $192 billion I calculated above that would be required to insure those who cannot afford to insure themselves.

In addition, emergency rooms are the most expensive form of health care, and they are not set up to help those with more common place ailments that, while deserving of a doctor's care, are not legally required to be dealt with under the government mandates. For example, if you are uninsured and need to have a cancerous growth removed surgically, you will not be treated. You may be treated for the pain that it is causing you, but no hospital is required to provide the surgery. This is the harsh reality for me, who like far too many of us lost a close family member to cancer, that someone who aquires such a harsh and devastating disease would not be provided medical support to fight it. I think that no-one should fight this battle without the option for medical treatment, and that the remaining $192 billion short fall in a $2.26 trillion dollar overall budget is a pittance to pay for the support of those who cannot access such care.

TODAY'S CONCLUSION
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Approximately 47 million people are uninsured in the U.S. Nearly 80% of those are legal citizens, and nearly 26 million of the 47 million simply cannot afford health care. The number of uninsured now is surely higher as we have just experienced the greatest recession since the Great Depression. Medical debt is the principal cause of bankruptcy in the U.S. (ref 1). The medical budget in the U.S., at $2.26 trillion, is close to the amount of the entire federal budget. The amount of waste and fraud that can be recovered is a large percentage of the roughly $200 billion needed to insure those who cannot afford insurance (using numbers from 2007 and my own calculations). Limiting medical malpractice suits and fighting fraud against Medicare and Medicaid could yield from $60 to $100 billion in return.

Many opposed to a government health care option believe the costs will be too burdensome. Given the costs we are already paying, I believe paying to care for those who cannot afford care in the current system is not as burdensome as some believe. I hope to have provided a basis for why I reach this conclusion, and I invite feedback.


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REFERENCES
ref 1: http://en.wikipedia.org/wiki/Health_care_in_the_United_States