Cheaper, Better Health Care Is In Our Grasp. Why Don't We Grab It?

For decades, US health reform has failed to address root causes.

Republican proposals such as the Better Care Reconciliation Act of 2017 and Democratic efforts such as the Affordable Care Act have focused on financing reform, re-jiggering the rules by which insurance products are designed, offered, and priced.

Little, if anything, has been done to address the underlying prices of health care goods and services.

As a result, regardless of the Senate bill’s fate, it seems the US has committed itself to an inexorable march toward ever-more health care spending.  It is essential that the American people recognize what we are foregoing by our choice to let health care spending grow unchecked.  

As most readers now know, roughly 18 percent of the US’s gross domestic product (GDP), $3.23 trillion annually, is spent on health care. Many industrialized countries achieve consistently superior health outcomes by spending only 12 percent of their GDP on health care.

What if, hypothetically speaking, the US were to follow suit? No one could accuse the US of skimping as 12 percent of the GDP is approximately $7,180 to be spent per capita, topping nearly every industrialized country even after adjusting for purchasing power parity.

GettyImages-668514578 Madison Tolchin visits Paula Glass, an advanced registered nurse practitioner, for a health checkup at a Planned Parenthood clinic on April 14, 2017 in Wellington, Florida. Joe Raedle/Getty

At 18 percent of the economy absorbed by health care, we have little room for other health-promoting investments. Our work suggests that directing these resources towards social service delivery could be a strategic way to bolster health system performance and improve outcomes.

Countries and states that allocate more of their total spending to social services in comparison to health services tend to achieve better health.  

An impressive 2012 paper titled “A Health Dividend for America” by Jeffrey McCullogh and colleagues at UCLA lend some shocking figures to this debate.

For $57.8 billion annually – less than half of one percent of our current health care spend – a host of social investments, all health-producing in themselves, could be made.

Head Start could be doubled in size to include an additional 900,000 children and universal pre-school education could be possible for all pre-k students who are not already enrolled in Head Start (cost: $12.8 billion).

Federal grants could be available to every small town in US so that the public library system could be expanded to reach 30.7 million additional beneficiaries over the next 10 years (cost: $6.9 billion).

Career training could be provided for one quarter of all unemployed people (cost: $18 billion). Job Corps could be doubled to serve an additional 45,000 people (cost: $1.7 billion) and nutritional assistance could be expanded to all 50 million food-insecure individuals in the US (cost: $18.4 billion).

These investments would leave a hundred billion more dollars available to be directed towards debt reduction, tax breaks, or other causes receiving bipartisan support for still less than half a percent of US GDP.   

The investments enumerated above generate valuable social ends in their own right. In many cases – particularly where spending is directed towards schooling, jobs, housing, and nutrition – available evidence suggests that policymakers may expect substantial spillovers in the form of improved health and reduced health care utilization.

Food such as SNAP may provide a particularly illustrative example.

New research released this month by Dr. Seth Berkowitz and colleagues at the Harvard Medical School finds that food insecurity was associated with significantly greater emergency department visits, inpatient hospitalizations, and days hospitalized.

On average, people who were food insecure cost an additional $1,863 in health care expenditures per year, amounting to an excess $77.5 billion annually nationwide. Although not all of this gap could be closed through food supports, some savings could reasonably be expected.

We recognize that extracting health care dollars from our current system is a political challenge if not impossibility. Nevertheless, the public should be aware of the opportunity costs associated with health care spending.

The ongoing outpouring of public support for Medicaid is noble, and efforts to extend financial protection for health care expenses to all should continue; however, more honest discussions about the tradeoffs inherent in health care financing are warranted.

To date, our relentless focus on changing the rules of health care financing has ignored underlying price concerns and overlooked the crowding out of other worthy social investments. Until the public faces up to these uncomfortable truths, the nation is unlikely to make sustainable progress on health reform.  

Elizabeth Howe Bradley is president of Vassar College and was the Founder and former Faculty Director of the Yale Global Health Leadership Institute. She has written or co-authored three books including The American Healthcare Paradox: Why Spending More Is Getting Us Less.    

Lauren A Taylor is a doctoral student at Harvard Business School and co-author of The American Health Care Paradox.