It is a common complaint among Democrats that they have no success with framing. On health care, however, they've had It is a common complaint among Democrats that they have no success with framing. On health care, however, they've had too much success with the framing -- what George W. Bush might call catastrophic success.
"Universal health care" is an ingenious phrase; it easily garners majoritiy support when polled and is almost impossible to argue against. What sort of grinch is against health care for all? The trouble is, defining the conversation in terms of universality (or a lack thereof) means implicitly defining the problem as an issue of access. Make no mistake, the fact that 45 million Americans are uninsured is a moral disgrace. But if we could achieve full coverage tomorrow, holding all other things equal, the system would collapse within a matter of decades. No one would be able to afford it.
Since 2000, health insurance premiums have shot up 87 percent. The economy has not grown by anything near a comparable amount. In 30 years, Medicare alone will be almost 8 percent of GDP. Give it a few more decades and it'll take more than 10 percent. And so we reach a tongue-in-cheek dictum known as Stein's Law: If something cannot go on forever, it will stop. Since we can't afford this sort of cost growth forever, eventually, we'll stop it. The question is how.
Progressives tend to focus, rightly, on the access question. It makes sense for a number of reasons. One is that the worst of the cost crises won't materialize for decades, while the uninsured lack health coverage now. Another is that cost control is only possible within an integrated, more centralized system, and such a system is better sold on grounds of access than on overall cost.
But how to best control costs should be considered, even if it never becomes a preeminent political talking point. It must be considered not only because the health system will collapse unless spending growth slows, but because we spend too much on health care in the United States. We spend more than we need to, first of all, because our prices are so high and our system is so inefficient. But even if we could purchase care at wholesale rates and construct the most effective delivery system in the world, we would still be spending more than we probably should. On this, the data is clear: We purchase more care than really benefits us.
The largest study of health insurance ever conducted, done over 15 years by the RAND corporation, randomly sorted individuals into different insurance plans with varying levels of generosity. Those in the most expansive plans received 40 percent more care than those in the least -- and their health outcomes were no better. The only exception was for the poor, whose health outcomes were hurt by cost-sharing and improved by more generous plans. The Dartmouth Atlas studies showed that regional variations in medical culture and doctor density led to, among other odd effects, 30 percent of seniors in Miami seeing more than 10 specialists in their last six months of life, compared to just seven percent of those in Oregon. Even with this huge variation in care, outcomes among the two populations were no different. The research is clear: Not only is more care not always better, it is sometimes worse -- and it is always more expensive.
For progressives, that's a problem, as excessive money spent on unlimited care could instead be going towards everything from more generous income supports to increased education funding to infrastructure improvements to rebates on payroll taxes. Health care is the most urgent of domestic progressive priorities, and rightly so, but it would be a better world if, in fixing the health care system, we could free up more money for other progressives priorities.
In their zeal to beat back universal health care, conservatives have argued that the primary problem with America's health care system is, indeed, overuse. We're all so heavily insured and totally insulated from health care costs, the argument goes, that we overuse care and thus make the system more expensive. And so if we exposed individuals to more of the cost of care -- if we paid for our actual health care, rather than paying premiums for our health insurance -- we'd use less of it. This is why conservatives love health savings accounts, which have high deductibles, forcing individuals to pay more for their care and, as the thinking goes, eventually use less of it.
You can, of course, dissuade individuals from using care by making it more expensive. Price an aspirin high enough and I'll never take one again. But there are a couple problems with that approach. The first problem, obviously, is income. Imposing a $5,000 deductible on a family that makes $120,000 a year will compel very different behavior than the same deductible on a family making $45,000.
The second is the conservative assumption that making us pay more and use less means we'll become smarter consumers of health care -- using less but doing just as well. The problem is, studies show that we're rather bad at discerning the good or necessary care from the bad or unnecessary, and, when prices go up, we tend to just cut back on everything. That's not only bad for health outcomes, it's bad for costs.
A 2006 study in The New England Journal of Medicine, for instance, compared Medicare patients who faced heavy cost-sharing for pharmaceuticals with those who had nearly unlimited benefits. The seniors with cost-sharing cut back on pharmaceutical spending (and thus, use) by about 31 percent. The results? More visits to the emergency room, more hospitalizations, and higher rates of death. And the upshot of all this is that the costs incurred by the deterioration in health completely erased the savings from the cost-sharing. So those with increased financial vulnerability not only had worse health outcomes, they didn't save money.
That's what makes cost-sharing so tricky. You don't want to disproportionately penalize the poor, or keep them from seeking necessary care. You don't want to decrease the use of cost-effective treatments. You don't want diabetics to abandon their treatment regimens and require amputations, or for patients to drop their hypertensive medications and suffer heart attacks. Not only is it bad for the patient, it's costly for the system.
But even though conservatives have embraced a crude, even regressive, form of cost-sharing, there's a kernel of insight to their account. In 1965, the average American received a bit under $1,000 in health care, and paid $483 out of pocket. In 2006, Americans received $6,640 in health care, and paid … $837 out of pocket. While total costs have increased by nearly 700 percent, out of pocket spending hasn't even doubled. It's not, however, as if we don't pay for that spending. It just goes through premiums, and lost wage increases, and taxes. In the end, we pay it all, we just do so in a way that encourages using ever more health care, and thus paying ever more for it.
Moving some of the spending to the front-end -- making us pay for care rather than premiums -- would certainly right some of those odd incentives. But it should be done in the context of a system-wide shift to a nationalized structure. The increased financial exposure of consumers will force better behavior from providers, but that's only half the battle. Even as you increase the perceived financial vulnerability of Americans (though their total costs will be far less), you can increase their protection against the practices and whims of providers. A major factor in our sky-high health costs is that Americans simply pay more per unit of health care than any other nation. We're getting gouged, and it has to stop. For that to happen, a new system must bring Americans into the same pool, so the government can use its massive market share to bargain down prices and advocate for their interests -- just like every other nation does.
So the question is how to create a cost-sharing system that is not merely progressive, but smart. And some of the most exciting thinking on the subject comes from a new paper by the economist Jason Furman on "The Promise of Progressive Cost Consciousness in Health-Care Reform."
Furman proposes a health system in which households making about 200 percent of the poverty line would pay 50 percent of health costs until they reached 7.5 percent of income. Above that, all expenses would be covered. Below 150 percent of the poverty line, there would be no cost-sharing, and between 150 percent and 200 percent, the limit would be 5 percent of income. Furman estimates that his plan would reduce health spending by an astonishing 30 percent.
That's a lot of money. And I'm a bit skeptical that any achievable plan could trigger such dramatic reductions. But there's no doubt that moving money from premium payments to point-of-care payments would reduce the amount of health care purchased. And that's largely to the good: As discussed, the money can then be freed for other priorities, and the best evidence that we have suggests health outcomes would remain unharmed. And, if we do it right, they could even be improved.
The trick would be exempting certain conditions and treatments from the cost-sharing. For instance, it's cost-effective and medically important to encourage adherence to statin regimens (cholesterol-lowering drugs), and the evidence shows that co-pays compel some to stop taking the medication. So statins shouldn't be subject to cost-sharing. Indeed, the French system provides a useful model here, as it erases cost-sharing for various chronic conditions (like diabetes) and cost-effective medications (like hypertension treatments) where it's cheaper and more healthful to encourage health care use.
In order to do that, you need an integrated system capable of setting system-wide priorities. As Furman, in fact, says, in a surprising admission for an economist associated with the centrist Hamilton Project, "The simplest and cleanest way to implement income-related cost sharing would be as part of a far-reaching fundamental health reform. For instance, a single-payer system could easily incorporate [it]." Such a system would not only save money, it would likely improve outcomes as well. And there'd be nothing catastrophic about that success.
Ezra Klein is a Prospect Writing Fellow.
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