The cost of health care
Question to our readers:
What is the greatest fiscal challenge facing the United States?
Health care costs.
Many readers might be surprised by this answer, since a more obvious choice, given today's headlines, is the sub-prime mortgage and credit crisis. But rising health care costs are likely to have even more catastrophic consequences for the federal budget and the national economy.
Peter Orzag, the director of the Congressional Budget Office, a non-partisan agency that advises Congress on budget policies, had this to say:
"Rising health care costs and their consequences for Medicare and Medicaid constitute the nation's central fiscal challenge. Without changes in federal law, the government's spending on those two programs is on a path that cannot be sustained."
The CBO is concerned because the rising costs of Medicare and Medicaid will add to an explosion of federal debt and consume an ever growing share of the federal budget, leaving diminished budget resource available for other purposes. Medicare has a payroll tax structure that depends on more people paying in than taking money out, but there will be a continued decline in the number of taxpayers paying into the program and a huge increase in the number of people claiming benefits. (The Kaiser Family Foundation has an excellent chart the illustrates the problem.)
Dr. Orzag's slide presentation from a lecture he gave at Stanford University describes the problem and possible solutions. He observes that most discussions in the media misdiagnose the problem, attributing it to aging and demographics, when most of the fiscal problem is due to rising cost per beneficiary (not number or type of beneficiaries). His slides present some fascinating observations from behavioral science about the reasons for increased health care spending, including what can be learned by studies on how the size of containers affects consumption of fresh and stale popcorn (see slides 24-26)! (The popcorn slides refer to a study in the Journal of Nutrition Education and Behavior, which found that "container-size influence is so powerful that even when the popcorn was disliked, people still ate 33.6% more popcorn when eating from a large container than from a medium-size container.")
What have Senators Obama and McCain been saying about the costs of health care, and specifically, Medicare? Again, just as was the case with the primary care crisis discussed in yesterday's blog, not too much. As shown in ACP's web tool that compares the candidate's positions, they have some modest proposals to create incentives for prevention and wellness; to improve care coordination; increase transparency by reporting on quality and cost of care; to fund comparative effectiveness research; and to increase use of health information technologies. Few experts believe, though, that such measures alone will solve the problem.
Without serious policies to slow the growth in health care, the next President--particularly if he is fortunate (or unfortunate) enough to be elected to a second term--could face a "Medicare meltdown" that exceeds the challenges posed by today's economic crisis. Bailing out Wall Street is tough enough, but what will it take to bail out the almost 62 million people who will be on Medicare by 2020?
Today's questions to our readers: Do you agree with Dr. Orzag that health care spending is the greatest fiscal challenge facing the Unites States? If so, what would you recommend the new President and Congress do about it?