Tuesday, March 21, 2017

Healthcare in the United States: What Is The Problem?


By Melissa Finnegan
 
For quite some time now our country has debated the successes and failures of the Affordable Care Act (ACA) and the proposed Republican replacement plan, the American Health Care Act (AHCA).  The bulk of the conversation has centered on the cost of health insurance.  Premiums are too high and unaffordable for many.  Who has access?  What's covered and what do the networks look like?  Should everyone be required to have insurance?

Years ago, as a brand new graduate student at the Humphrey School of Public Affairs, I took a class entitled Introduction to Policy Analysis with Dr. Sam Myers.  Dr. Myers lectures in much the same way a Baptist minister preaches.  It's enthusiastic, loud, and memorable.  It’s also designed to make you focus on deeper truths.  As a result of that class, one phrase is forever burned into my brain: “What. Is. THE PROBLEM?!

In consideration of that fundamental question, I argue that the cost of health insurance is not the main problem we need to solve.  It is a symptom of the real problem.

So what is the problem?  Healthcare costs in the United States are entirely too high and there are not enough structures in place to address them.  Steven Brill’s detailed exposé of medical costs in Time Magazine demonstrates how wildly inflated pricing devastates many patients and their families.  Until we can get the escalating cost of healthcare under control, health insurance premiums will continue to go up.    It won't matter if we continue with the ACA or repeal it and adopt the AHCA; the more expensive care is, the more insurance costs will rise to pay for it.

The misunderstanding of the problem is so pervasive that it's even invaded Google.  I entered the search phrase "average cost of health care" and the first page of results were all for sites addressing the cost of health insurance.  Not the question I asked.

I did finally find the information I was looking for and it doesn’t look good.  According to data from the Organisation for Economic Cooperation and Development (OECD), the United States spends more on healthcare, per capita, than any other industrialized nation in the world.  But that spending does not translate into our population being healthier.  As shown by the OECD chart below, the United States is a clear outlier in terms of life expectancy related to per capita health spending.



One of the drivers of high health care costs is pharmaceutical drugs.  For example, according to a study conducted by the Minnesota Department of Health, approximately 20% of healthcare spending in Minnesota in 2013 was for pharmaceuticals.  Between 2009 and 2013, prescription drug spending rose 20.6%.  Developments in Minnesota are reflective of national trends; a recent federal health report found that prescription drug prices rose 12.6% in 2014.  One can only imagine how that these prices have grown in the past few years.  

But it's not just drugs alone.  As a pregnant woman, I'm especially interested in the cost of giving birth.  Luckily, I'm insured by my employer, but many people are not.  According to a Truven Health Analytics Marketscan Study, the average payment for a vaginal birth for someone with employer insurance is $12,520.  This price includes pharmacy fees, radiology/imaging fees, laboratory fees, professional services fees, professional anesthesiology fees, and facility fees.  

Notice I said "average payment" and not "average cost."  That's because how much is paid by the consumer is related to the type of insurance they carry.  The payment rates are entirely different depending on if the patient is on private insurance vs. Medicare or Medicaid.  Private insurance plans tend to pay more.  This is why, for example, the CEO of the Mayo Clinic recently admitted that, all other things being equal, Mayo will prioritize patients with private insurance over those on public programs.

So how do we address the real problem?  How do we bring healthcare costs down to a manageable level and, as a result, reduce the cost of health insurance?  There are a variety of options, including prioritizing public health efforts that help prevent people from getting sick in the first place.  Regulatory structures could set rules and guidelines for pricing. Also under consideration is movement away from a fee-for-service structure, where items are paid for on an à la carte basis.  In this model, providers make more money based on the number of services they provide, as opposed to results and outcomes.

My ultimately point is that we shouldn’t assume that erasing the ACA or resisting the AHCA will solve the deeper problem of healthcare costs that the United States is currently facing.  There is no question that the health insurance market needs to be addressed, but focusing only on that symptom without addressing the underlying problem is essentially putting a band-aid on an amputation.

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This post represents the opinion of the author in her personal capacity and should not be construed as the official position of any agency, organization, or contractor by which the author is presently or has been previously employed.