The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Health Care Reform’s Chicken and Egg

Posted by Alan on December 13, 2007

In the context of health care reform, the chicken and egg conondrum is accessibility and affordability. Which comes first?

Access advocates note that decreasing the number of uninsured will reduce the “hidden tax” imposed when the cost of uncompensated care is shifted to those with coverage. Affordability proponents point out that until coverage is affordable, too few will be able to obtain and use it.

The tension between access and affordability is one of the reasons Governor Arnold Schwarzenegger and the Legislative Leadership are having such a hard time producing a health care reform package for California. Governor Schwarzenegger is seeking to increase access by requiring all residents to obtain coverage. Speaker Fabian Nunez is attempting to assure coverage is affordable by creating an exemption to the Governor’s coverage mandate if the cost of premiums and out-of-pocket expenses exceeds 6.5 percent of a family’s income.

The chicken and egg debate is also a feature of Democratic presidential campaigns, too.  Senator Hillary Clinton attacks Senator Barack Obama for presenting a health care reform plan that fails to achieve universal coverage while Senator Obama questions how Senator Clinton plans to force Americans to buy coverage they can’t afford.

So which comes first? Access or affordability? As I’ve posted several times, I believe affordability has to come first. Newsweek’s Robert J. Samuelson makes a strong case for why. Writing in the magazine’s December 10th issue, Mr. Samuelson takes to task politicians who focus exclusively on expanding coverage. “Everyone believes in adequate health care; people should have it when they need it. Politicians cater to these beliefs. But the intellectual and even moral laziness of this approach results in an invisible abdication of political responsibility. We are letting the unchecked rise in health spending automatically determine national priorities.”

The need for controlling health care costs is clear (and has been the topic of many a post on this blog). Mr. Samuelson cites three key facts:

  • At $2 trillion dollars, health spending already accounts for about 16 percent of the gross domestic  product. By 2030 it could exceed 25 percent. This saps resources away from other priority items.
  • We currently tax young people to pay the costs of seniors. Older Americans (65 years and over) account for an eighth of the population and a third of all health spending. By 2030 they could account for 20 percent of the population and close to half of medical spending. Americans under age 64 by-and-large pay those costs.
  • No one has demonstrated the ability to control costs The average cost of providing benefits to Medicare beneficiaries rose 8.9 percent a year from 1970 to 2005. During the same period, spending on Americans with private health insurance rose 9.8 percent. The slight difference, Mr. Samuelson notes “may reflect cost shifting. When Medicare imposes price controls, doctors and hospitals increase prices for privately insured patients).

 These trends are unsustainable. Unless medical costs are constrained, spending on health care is crowding out what’s available for other critical tasks. “We are letting the unchecked rise in health spending automatically determine national priorities,” is how Mr. Samuelson puts it.

The problem, he notes, is that “[t]he politics of health care rests on a mass illusion: most Americans think that someone else pays for their care.  Workers with employer-provided insurance believe that their companies pay. Retirees and the poor think that the government … pays. No one has an interest in controlling spending, because everyone believes it burdens someone else.”

Mr. Samuelson’s solution: “People need to see and feel health costs.” But he recognizes “most Americans do not want to face the difficult political, economic and moral issues posed by unchecked health spending …. The impulse is to blame some unpopular villain (drug companies, insurance companies) and to focus on a simpler problem — say, the uninsured.”

He warns that failing to address the issue of costs makes meaningful health care reform impossible. “The present politics of health care aims to camouflage [health] costs and skew the choices.”

What’s interesting is that there’s actually a broad consensus among policy makers that affordability is central to comprehensive reform. The health care reform packages put forward by the Governor, the Democratic Leadership and the Republican caucus all include cost containment features. It’s a primary focus of California Insurance Commissioner Steve Poizner. It’s a central focus of the California Association of Health Underwriters’ Healthy Solutions plan.

Yet for the past 11 months in California medical cost containment has been an afterthought in the negotiations. Politically, access comes first. Without tackling affordability, however, paying for that access will break the bank.


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