Final Thoughts on Rethinking Our Approach to Spending
Dr. Claudia Chaufan makes some good points in her recent post about the excesses of U.S. health care finance. Like her, I can’t justify executive salaries at for-profit health plans in the tens or hundreds of millions. But the stratospheric total she cites – $1.75 billion in compensation in 2002 – still represented only about one-tenth of one percent of all national health spending that year. Could it have been better or more justly spent? Undoubtedly. Would redirecting all of that executive compensation cover appropriate care for all Americans, an aspiration that Dr. Chaufan and I share? No. Urban Institute researchers estimate that extending care to all currently uninsured Americans would cost between $34 and $69 billion in 2001 dollars. Not a large sum compared to total annual health expenditures (about $1.6 trillion in 2002, $2.2 trillion at last count [PDF]), but a great deal more than health plan executive salaries.
What about Dr. Chaufan’s concern that serious consideration of a single-payer approach has been missing in the national health reform debate, and her implication that enacting a single-payer plan would solve the cost conundrum? The Congressional Budget Office may not have estimated the cost of a single-payer approach, but the California Legislative Analyst’s Office (LAO) did just that in 2008, in the context of pending California legislation (SB 840, Kuehl). The LAO concluded that the proposed single-payer plan would require new payroll taxes of about 8 percent paid by employers and 8 percent paid by workers. That totaled 16 percent – not coincidentally, the share of the total economy that goes to health care today. A single-payer approach would cause health spending to flow in radically different ways, but to change the total amount we spend would require additional steps.
In my original post, I laid out a few ways to fundamentally alter how much we pay for health services. None of these is quick or easy. We can change the way care is provided or how we pay for it. We can invest in prevention and health promotion so that less care is needed. We can work to eliminate the use of ineffective care while encouraging cost-effective approaches.
To make progress with any of these approaches will require greater transparency and accountability within the health care delivery system and among those who pay for care. It will leave some of us with less in order to provide others with more.
David Brooks of The New York Times wrote this week that “We’ve built an entire health care system (maybe an entire government) on the illusion of something for nothing. Instead of tackling that basic logic, we’ve got a reform process that is trying to evade it.” The risks and rewards inherent in the political process tend to perpetuate that illusion; human nature inclines most of us to accept it. Given the importance of the task, though, I hold out hope that policy makers and citizens will tackle the tough decisions needed to move the country toward more affordable and appropriate care for all.
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Thank you, Mulkey, for making the point that even that fantastic amount of money is less than 0.1%.
I suspected that Dr. Chaufan was trying to pull a fast one on us by citing that figure out of context, but I could not verify it. So all the readers of the forum should be grateful to you for doing this.
Likewise, I suspected that they were trying to pull a fast one on us, whoever claims the Congressional Budget Office did not evaluate Single Payer Plan. For of all those people on the web, whose claims I read, not ONE stated the Office’s motive for not doing it. They ALL offered their own speculative reasons as if they were fact.
Again, thanks for correcting this omission.
That said, I have to say that the LAO’s estimate is not convincing. For as you yourself point out, they tax increase they estimate matches what is spent today. But this seems to ignore how much costs will change if a single payer plan is adopted.
This is because in effect, a single payer plan is really a government enacted price-ceiling. It enacts the ceiling by using the size of the government order for services to dictate a low price, a price lower than the market price. It is a monopoly not of the producer, but of the consumer. But it is a monopoly, and therefore it interferes with the system’s ability to reach a fair market price.
Dr. Chaufan might not be willing to admit it, but it is a fact economic history that EVERY time the government enacts a price-ceiling, we get the opposite of the stated intent: instead of lowering the price, we get shortages and high prices on the black market.
This is not just conservative propaganda, nor is it an argument for unbridled laissez-faire, it is fact.