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Three Inconvenient Truths About Health Care

Posted by Jane Akre
Thursday, October 23, 2008 12:25 PM EST
Category: Major Medical, Protecting Your Family, In The Workplace
Tags: Managed Care and Insurance Companies, FDA and Prescription Drugs

Dr. Fuchs writes in the NEJM on three inconvenient truths of delivering health care to Americans.



IMAGE SOURCE:  Center for Health Policy, Stanford web site/ Dr. Victor R. Fuchs


Three “Inconvenient Truths ” about health care is the title of a brief article that appears in the New England Journal of Medicine (NEJM) today.

Written by Dr. Victor Fuchs, a professor emeritus of economics at Stanford University, he says everyone agrees that our health care system in the U.S. needs fixing, but the obstacles are numerous and complicated.

Large numbers of uninsured, the cost of health care, and the rising increase in expenditures necessitate a change. Something to consider in this NEJM report:


  • U.S. health care costs has grown 2.8 percent every year, faster than the rest of the economy


At this rate, the cost of health care will absorb 30 percent of the gross domestic product, exceeding all current government spending combined.  Impacts will be felt on education, infrastructure and national security.  Reducing the rate of growth of all health spending is the only solution, the report says.

With the U.S. spending roughly twice per person as other high-income countries, we need to understand what’s fueling the rise - administrative costs, insurance company profits, and executive high salaries.

Administrative costs include jobs in the industry such as telephone operators, claim payers and insurance salespersons.  Ordering more care and procedures raises the cost of health care, but also provides jobs for those above.


  • Advances in medicine contribute to the growth in health care spending faster than the rest of the economy


The question then becomes – how do we benefit from advances in medical care while capping the expenditures?

Dr. Fuchs looks at the big picture such as Britain’s National Institute for Health and Clinical Excellence, a large, semi-independent organization that evaluates the benefit of new medical interventions compared to the costs. It’s difficult for individual doctors of hospitals to carry out the necessary analyses but they must be willing to take that information into their daily practices, Dr. Fuchs says.    


  • Universal coverage requires subsidies for the poor and sick


The U.S. does not deal well with these realities, instead assuming subsidies help those who want a “free ride”.  While politically, the most appealing plans let the “haves” think someone else is paying for the “have-nots”, the reality is that more than half of insured Americans get their policies through work. Employers afford the coverage by reducing potential wage increases, increasing prices for what they sell, or lowering profits.  

With health insurance premiums rising 300 percent in 30 years, the money for coverage has cut wage increases that would normally accompany growth in productivity.  Instead workers are going without inflation-adjusted raises at the same time that corporate profits have increased by 232 percent, after adjusted for inflation.

In other words, employers are not using corporate profits to pay for health insurance, but workers’ real wages.  This misunderstanding represents a “tremendous obstacle to gaining public support for a more efficient, more equitable way to pay for health insurance,” Dr. Fuchs says.

Politicians often muddy the water by saying that government “gives” people health insurance, when every dollar spent on health insurance comes out of the public pocket.  

If the government was “giving” health care, it would be in the form of taxes.

Dr. Fuchs concludes that making basic health insurance available to everyone regardless of income, employment status, and family circumstance, and to pay for it with a tax proportional to income or consumption is the most efficient and equitable way to achieve universal coverage.

“The long-running debate about health insurance and health care that is continuing this fall will be more constructive, and possibly more fruitful, if all the participants would take these “inconvenient truths” as a starting point,” he says.

Dr. Fuchs received grant support from Blue Shield of California Foundation for this report. #

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