Getting Real About Health Care

Unless you've been living in the Himalayas, you know that huge numbers of Americans—46 million last year, or almost one in seven of us—lack health insurance. By impressive majorities, Americans regard this as a moral stain. At the Democratic National Convention, Sen. Ted Kennedy echoed the view of many that health care is a "right" that demands universal insurance. This is a completely understandable view and one that is, I think, utterly wrong. Take note, Barack Obama and John McCain.

Whoever wins should put health care at the top of his agenda. But the central problem is not improving coverage. It's controlling costs. In 1960, health care accounted for $1 of every $20 spent in the U.S. economy; now that's $1 of every $6, and the Congressional Budget Office projects that it could be $1 of every $4 by 2025. Ponder that: a quarter of the U.S. economy devoted to health care. Would we be better off? Probably not. Countless studies have shown that many diagnostic tests, surgeries and medical devices are either ineffective or unneeded. "More expensive care," notes CBO director Peter Orszag, "does not always mean better care."

Greater health spending should not have the first moral claim on our wealth, because its relentless expansion is slowly crowding out other national needs. For government, higher health costs threaten other programs—schools, roads, defense, scientific research—and put upward pressure on taxes. For workers, increasingly expensive insurance depresses take-home pay, as employers funnel more compensation dollars into coverage. There's also a massive and undesirable income transfer from the young to the old, accomplished through taxes and the cross-subsidies of private insurance, because the old are the biggest users of medical care.

It is widely assumed that health care, like most aspects of American life, shamefully shortchanges the poor. This is less true than it seems. Glance at the adjacent table. It comes from economist Gary Burtless of the Brookings Institution and is based on a government survey of health spending. Burtless was understandably astonished when he assembled these data: they show that, on average, annual health spending per person—from all private and government sources—is equal for the poorest and the richest Americans. In 2003, it was $4,477 for the poorest fifth and $4,451 for the richest.

Probably in no other area, notes Burtless, is spending so equal—not in housing, clothes, transportation or anything. Why is this? One reason: government already insures more than a quarter of the population, including many of the poor. Medicare covers the elderly; Medicaid, many of the poor and their children; SCHIP (State Children's Health Insurance Program), more children. Another reason, I suspect, stems from the skewing of health spending toward the very sick and dying; 10 percent of patients account for two thirds of spending. People in this unfortunate group, regardless of income, get thrust onto a conveyor belt of costly care: long hospital stays, many tests, therapies and surgeries.

That includes the uninsured. In 2008, their care will cost about $86 billion, estimates a study for the Kaiser Family Foundation. The uninsured pay about $30 billion themselves; the rest is uncompensated. Of course, no sane person wants to be without health insurance, and the uninsured receive less care and, by some studies, suffer abnormally high death rates. But other studies suggest only minor disadvantages for the uninsured. One study compared the insured and uninsured after the onset of a chronic illness—say, heart disease or diabetes. Outcomes differed little. Here are the results. After about six months, 20.4 percent of the insured and 20.9 percent of the uninsured judged themselves "better"; 32.2 percent of the insured and 35.2 percent of the uninsured rated themselves "worse." The rest saw no change.