The ACP Advocate Blog

by Bob Doherty

Thursday, February 4, 2010

We're #1! We're #1!

... in national health care expenditures, that is. This, of course, is nothing new: spending on health care in the U.S. has long out-paced any other industrialized country. What is noteworthy is "the largest one-year increase in [health care's] GDP share since the federal government began keeping track in 1960" blogs Chris Fleming, of Health Affairs. He writes that a new study shows that health care spending increased by an estimated 5.7 percent since 2008 despite a projected decline in the gross domestic product (GDP) in the same period.

The recession is having a big impact on respective roles of the public and private sectors. "Health spending by public payers is expected to have grown much faster in 2009 (8.7 percent growth, to $1.2 trillion) than that of private payers (3.0 percent growth, to $1.3 trillion)" Fleming writes, which is attributable to an increase in "projected growth in Medicaid enrollment (6.5 percent) and spending (9.9 percent) as a result of increasing unemployment related to the recession. Conversely, enrollment in private insurance is expected to have declined 1.2 percent in 2009, despite federal subsidies for Americans who have lost their jobs to extend their private insurance coverage via the Consolidated Omnibus Budget Reconciliation Act (COBRA) that increased participation in these plans."

"For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance", writes Peter Landers in the Wall Street Journal.

Free-market advocates would be loath to admit it, but in an employer-based private insurance system, when people lose their jobs, they also lose their coverage, unless the government steps in to provide it. If it wasn't for Medicaid and the government subsidies for COBRA coverage, far more Americans would have been without health insurance during this recession.

And for all of the anti-government sentiment among much of the electorate, I don't see people demanding that Congress repeal Medicaid or eliminate COBRA subsidies, or get rid of Medicare or the VA, for that matter. People dislike government, except when they need it.

What the health reform bills propose to do is replace the current patchwork system with an improved safety net - expanded Medicaid for the poor and near-poor, tax credit subsidies for people up to 400 percent of the federal poverty level, limits on pre-existing condition exclusions, and subsidies and purchasing pools to make coverage more available and affordable for small businesses. They would build upon what the government already does - provide people with affordable coverage when the private, employer-based system fails them - but in a more organized and coherent way.

Today's question: What is your reaction to the new estimates on government and private sectors spending on health care?


Blogger Jay Larson MD said...

I have one question. Whose pockets does the extra money spent on health care go into? Unless this issue is dealt with, health care spending will continue to escalate out of control no matter who is paying the bill.

February 5, 2010 at 9:42 AM  
Blogger Rich Neubauer MD said...

My reaction to this is: "And what was that argument that we don't need comprehensive health care reform?"

February 5, 2010 at 12:34 PM  
Blogger Steve Lucas said...

Adding to Jay’s comments, my concern is the third party payment system and the inherent issues this raises. Medicare prompts hospitals to over test while under paying physicians.

Insurance will not resolve our cost or access issues. As long as there is a way to game the system those involved will maximize their income to the detriment of those paying. The results will be continuing increases in cost.

Steve Lucas

February 5, 2010 at 1:41 PM  
Blogger Arvind said...

Why is this a surprise? If individuals and families were allowed the same level playing field as employers do, they would have their own health coverage that did not depend on their employment. It is funny when you say that people depend on the government. This is exactly what the government has created over the past 40 years - people dependent on the govt (guaranteed vote banks).

Your love of government is going beyond my wildest imagination, Bob. I hope the ACP leadership is not completely influenced by this notion.

And BTW, where are these Medicaid recipients getting their care from? Has anybody asked them how well Medicaid works for them? It would help to get an answer to that.

February 6, 2010 at 6:16 PM  
Blogger Robert J. Sobel, M.D. said...

This growth reflects the sobering realities, though the percentage of GDP bump can also be considered a sign of resilience in the health care industry versus some of the other discretionary spending that defines the rest of the GDP. The public growth is indeed a reflection of multiple factors, success in longevity gains being the most prominent.

Reality suggests that retirement by routine before 75 is no longer practical. A gradual transition in the public sector burden of aging via later provision of both social security and Medicare benefits would have to be considered if we truly want to balance the budget without undue taxation. A fair, not-for-profit, state-based, core services, private insurance industry could exhibit slower growth with limits on marketing, government enforced infrastructure limits, and price regulation to replace the current brand/generic pharmaceutical landscape.

We'll get closer to a good outcome if we do a streamlined reform that acknowledges some sectors will have to shrink a bit.

February 6, 2010 at 6:39 PM  

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Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

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