Obama’s Unhealthy Choices

What really drives health spending, the study finds, is that Americans receive more costly medical services than other peoples do, and pay more for them. On a population-adjusted basis, the number of CT scans in 2005 was 72 percent higher in the United States than in Germany; U.S. reimbursement rates were four times higher. Knee replacements were 90 percent more frequent than in the average wealthy country and are growing rapidly. In 2005, there were 750,000 knee and hip replacements, up 70 percent in five years, reports the journal Health Affairs.

We have a health-care system that reflects our national values. It's highly individualistic, entrepreneurial and suspicious of centralized supervision. Despite gripes about limits imposed by private insurers and Medicare, there are few effective controls on doctors' and patients' choices. That's what most Americans want. Patients understandably desire the most advanced surgeries, diagnostic tests and drugs. Doctors want the freedom to prescribe and recommend.

The open-ended nature of insurance reimbursement encourages this expensive style of medicine by making it easier to recover the costs of new technologies and therapies. Economist Amy Finkelstein of MIT has estimated that roughly half the real increase in per capita health spending from 1950 to 1990 reflected the spread of comprehensive health insurance. In 2006, consumers' out-of-pocket spending represented only 13 percent of total health spending, down from more than 50 percent in the 1950s. The trouble is that this semiautomatic system may now frustrate other national goals, because it displaces other spending and results in care that is unneeded or ineffective.

On paper, there are various ways to control health spending: impose stricter regulations on prices and the availability of care; adopt "market mechanisms" that push consumers toward more efficient, more effective or skimpier care. All have been tried and have failed, because they cannot be maintained long enough or toughened enough. The reason is politics. There is no major constituency for controlling spending. Because most patients don't pay their medical bills directly, they have little interest in using less care or shopping for lower-priced services. Providers (doctors, hospitals, drug companies, equipment manufacturers) have no interest in limiting care. What others call "health costs" are their incomes—wages, salaries, profits.

Unless we rectify this political imbalance, efforts to control health spending are likely to be futile. We need mass constituencies that favor cost control. But our consistent policy has been to conceal the burden of health spending by burying it in untaxed corporate fringe benefits or government budgets. We could change this. We could charge the elderly more for Medicare. We could tax employer-provided health insurance as ordinary income. We could create a dedicated federal tax to cover government health costs—if health spending rose more than income, the tax would automatically rise. People would quickly see and feel the costs of our present system.

Because this is so, all these possible responses would be unpleasant and unpopular. That's the point: to compel Americans to face the uncomfortable questions—how important is health care compared with other priorities, for whom and why?—that we have long avoided. Will Obama be so bold? In his campaign, he proposed more, not less, health spending. It's easier to embrace the rhetoric of change than change itself.

© 2009