We spend more on healthcare as a percentage of Gross Domestic Product (GDP) than any other first-world country – by far. A report from the Center for Medicare and Medicaid Services shows that from 2009-2013 total healthcare spending (public and private) averaged 17.4% of GDP in America, and that it will rise to 19.3% by 2023.
For the same period, the next highest spending countries were the Netherlands at 12.3%, France 11.6%, Germany 11.4%, Switzerland 11.2%, Austria 11.1%, Denmark 11.0%, and Canada 11.0%. Other countries of note are: Japan at 10.0%, the U.K. 9.3%, Israel 7.3%, and Taiwan at 6.6%.
Polls in these countries rank quality of care and patient satisfaction as comparable, or better, than America. In addition, all of these countries also have higher life expectancy than America, as do Cuba and Lebanon. In case you are wondering, Cuba spends 10.1% of GDP on healthcare, and Lebanon 7.2% of GDP. Cuba and Lebanon? Come on.
So we are paying far more, but arguably not getting substantially better care.
As thought-provoking as these numbers are, what makes it alarming is how federal spending on healthcare continues to grow. The non-partisan Congressional Budget Office estimates that federal spending on healthcare will reach 30.8% of total spending by 2025, up from 26.4% in 2014. This level of spending is unsustainable.
If spending on healthcare isn’t arrested something else will have to give in the budget. We will either have to make cuts to other important programs (like defense, education, research, etc.), raise taxes, or Congress can continue to add to our colossal national debt (a very bad idea). We are spending too much on healthcare. Not just the federal government, but also as individuals.
The way we pay for healthcare has evolved over the past 85-90 years into an expensive and inefficient model that few are happy with. In 1929, Blue Cross offered its first health insurance plan. As the popularity of health plans grew, several life insurance companies entered the business in the 1930s and 1940s.
In the early 1940s, wage freezes imposed due to WWII made it difficult for employers to attract new workers. Since businesses couldn’t pay higher wages they begin offering healthcare coverage to entice applicants. After the war ended in 1945, the health insurance business boomed. Unions successfully negotiated for quality, tax-free, employer-sponsored health insurance; and employers also began offering health plans to attract white-collared workers. Public sector employers began doing the same in order to compete.
From 1940 to 1960, the number of people covered by health insurance plans grew from about 20 million to over 140 million resulting in over 75% of Americans having coverage.
Starting with an unsuccessful attempt for national health insurance by President Truman in 1945, Democrats have steadily pushed for public healthcare coverage; and Republicans have routinely opposed it, insisting on private market coverage (the exception being Medicare Part D – promoted and passed by the GOP in 2003). Medicare and Medicaid were added in 1965, the Children’s Health Insurance Program in 1997, and Obamacare in 2010. The results of these decades long and highly partisan political battles, is the current hodgepodge system. Consequently, we have neither a truly private market system, nor truly national health insurance.
The system is somewhat based on the private market, but it doesn’t look like a free marketplace. Patients usually have no idea what anything costs, seldom ask about price, and rarely haggle. Since insurance or a government program is going to pay most of the bill, there is little incentive to shop around and not much sense of individual responsibility. And costs for care can vary widely. In one CBS story last year, it was reported that heart failure in Denver may cost $21,000 or $46,000 depending on the facility; and in Jackson, Mississippi, the range was from $9,000 to $51,000. For joint replacement the low was $5,300 in Oklahoma, and $223,000 in California.
The current system encourages waste. The fee-for-service model in healthcare, which has been in place for a long time, fueled spectacular growth in healthcare spending over the past half century. This model results in over-testing, redundancy and disorganization. The fee incentives and fear of lawsuits leads to an excess of consultations and over-testing, and is a way for less ethical healthcare providers to boost their revenues.
Many people are also not happy with the way the current healthcare delivery system works either. The doctor-patient relationship isn’t what it used to be – most people over 40 miss the days when they had one doctor who knew them well. About one in two doctors are now employees, with less autonomy and authority.
Healthcare providers don’t really want doctors spending too much time with patients – time is money. The time patients spend meeting with doctors seems to be getting shorter, and can leave patients feeling unheard and unsatisfied. There’s also little time for small talk and for doctors and patients getting to know each other. This makes the doctor-patient situation feel like it is becoming more transaction based than relationship based, even though relationships can be critical in helping patients trust important advice.
In this environment, it can seem like doctors aren’t allowed to care about patients – it has become cost prohibitive. Doctors may not be happy about it either – one recent survey of 12,000 doctors showed that just six percent have good morale.
Ultimately, there will need to be changes made. We have the most expensive and complicated health insurance system in the world, much of it paid for by taxpayers, and millions of people still without coverage. We cannot continue to spend so much on healthcare, especially in the federal budget.
Many experts agree that this is not a medical science problem, but a managerial and organizational challenge – how healthcare is organized, delivered, measured and reimbursed. Polls show that most people are happy with the quality of their care, but not so much with the delivery and billing systems.
In next week’s blog I plan to write about some ideas to address these challenges. I welcome your feedback on these topics. Feel free to leave your thoughts in the “comments“ section below. If you’d like to keep your thoughts private, please reply with an email instead.
Links to related blogs:
Medicaid and Obamacare: http://www.commonsensecentrist.com/medicaid-and-obamacare/
More on Medicaid and Obamacare: http://www.commonsensecentrist.com/more-on-medicaid-and-obamacare/
Medicare turns 50 – will it survive another 50 years: http://www.commonsensecentrist.com/medicare-turns-50-will-it-be-around-another-50-years/
Options for Fixing Medicare Spending: http://www.commonsensecentrist.com/options-for-fixing-medicare-spending/