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Why Obama Care Doesn't Sell
by Jeremy Siegel, Ph.D.
Link to article
Posted on Monday, August 3, 2009, 12:00AM
The press and the polls say that public support for President Obama's health care reform is slipping. I think I know why. Obama has yet to make a case why his proposals will reduce costs and deliver better care services.
And, despite denials by the administration, the vast majority of Americans fear Congressional plans will ultimately reduce their choices and lower the quality of their care.
But that doesn't mean that nothing should be done. Americans spend much more on health care than any other country without receiving significantly better health outcomes. I am even willing to countenance a government-run program for those who can't afford private insurance. But I still have big questions that make me very uneasy about upcoming legislation. Let me list a few key issues that trouble me.
Health Costs
Americans now spend nearly 17% of GDP on health care. This is 5 to 10 percentage points more than is spent in other developed countries such as those in Europe and Japan.
What is the source of these differences? One is administrative costs, which are extremely high in the U.S. Here, savings can be made. But some of the difference is due to our legal system, where the threat of malpractice suits often leads to over-testing and over-treatment. How important is this factor, and what can be done about it?
We spend more on drugs, doctors and hospitals. Certainly some of these expenditures do lead to better health care. But how much? Let's get some good answers to these questions so we will know in which areas we can generate savings without sacrificing quality.
Moreover, why do we have state-run system where each state spends billions of dollars replicating each other's regulations? Why can't we introduce competition into the private insurance system by offering nationwide plans that satisfy a nationally determined set of criteria? It won't be easy, but it would be gutsy if Obama could move against these costly entrenched state bureaucracies.
Uninsured
We hear that are between 40 and 50 millions Americans who do not have health insurance. Who exactly are these people? I have read that many are illegal aliens and over half of the uninsured make more than $50,000 a year. They can afford to buy insurance but prefer not to because they believe that they will get free or sharply discounted health care anyway. And quite a few others are eligible for Medicare of other government programs, but do not sign up.
Uninsured people do receive health care. Some pay for it on their own. But most go elsewhere. Many go to emergency rooms for treatment, which are mandated to take all comers, insured or not. In these cases it is ultimately the taxpayer and hospitals who end up paying their bills. Some uninsured patients get heavily discounted services elsewhere.
If we are already paying the tab for health care for most of the uninsured in one form or another, how come the Congressional Budget Office says that the Obama plan will cost over $1 trillion dollars over the next 10 years?
Preventable and Terminal Health Expenditures
I have read that up to one-third of all health costs are due to bad health habits, particularly smoking, overeating, lack of exercise and so on. I also have read the some businesses have introduced health plans that reward healthy lifestyles with lower health premiums. Current legislation prohibits insurance companies from denying coverage to those with "pre-existing conditions." But some of these conditions are due to the lifestyle of the patient and could be modified. Are there any incentives built into Obama's programs that encourage healthy behavior?
Furthermore, I have read that up to one-third of medical costs are incurred in the last few weeks of a person's life. Are all these expenditures necessary? Does Medicare's reimbursement system encourage overspending on hopeless procedures in the final days of a patient's life because they are reimbursable? I have personally seen situations where I believed that this has happened.
In fact, how much is our entire insurance system, both public and private, geared toward reimbursable procedures rather than better, but non-reimbursable treatments? Are there any measures in the Congressional bills to address these issues and control those expenditures?
Government Plans
I could envision a government-run health program providing basic coverage to any American who chooses to belong, even if it is subsidized by the taxpayer. And I don't believe critics who claim that such a plan will destroy the private insurance or health care system. I work in a private university system that flourishes alongside highly subsidized state-run colleges and universities. And there are other countries that have a socialized and private sector working side by side.
Yet I think the private sector would do best at providing care at all levels. Just as charter schools have been successful at providing innovative services in our highly socialized secondary school system, the government should allow private enterprise, freed from costly bureaucratic rules and regulations and shielded from excessive threats of litigation to show how it can reduce health costs.
Final Thoughts
It is true that Medicare is the big "budget buster" over the next two decades and that improving the delivery of health care will improve the long-term economic outlook. But why, in the midst of the worst recession in 75 years, do we have to rush into a mammoth reform of the health care system, especially one that will significantly increase our already swollen deficit?
Health care is contentious enough that Obama should not move ahead until he has some consensus. Perhaps he should appoint a bipartisan commission to study these issues come up with a set of recommendations.
To use Obama's own words, we need reform we can believe in, not just a new government program financed by higher taxes, new mandates and a trillion-dollar price tag.
by Jeremy Siegel, Ph.D.
Link to article
Posted on Monday, August 3, 2009, 12:00AM
The press and the polls say that public support for President Obama's health care reform is slipping. I think I know why. Obama has yet to make a case why his proposals will reduce costs and deliver better care services.
And, despite denials by the administration, the vast majority of Americans fear Congressional plans will ultimately reduce their choices and lower the quality of their care.
But that doesn't mean that nothing should be done. Americans spend much more on health care than any other country without receiving significantly better health outcomes. I am even willing to countenance a government-run program for those who can't afford private insurance. But I still have big questions that make me very uneasy about upcoming legislation. Let me list a few key issues that trouble me.
Health Costs
Americans now spend nearly 17% of GDP on health care. This is 5 to 10 percentage points more than is spent in other developed countries such as those in Europe and Japan.
What is the source of these differences? One is administrative costs, which are extremely high in the U.S. Here, savings can be made. But some of the difference is due to our legal system, where the threat of malpractice suits often leads to over-testing and over-treatment. How important is this factor, and what can be done about it?
We spend more on drugs, doctors and hospitals. Certainly some of these expenditures do lead to better health care. But how much? Let's get some good answers to these questions so we will know in which areas we can generate savings without sacrificing quality.
Moreover, why do we have state-run system where each state spends billions of dollars replicating each other's regulations? Why can't we introduce competition into the private insurance system by offering nationwide plans that satisfy a nationally determined set of criteria? It won't be easy, but it would be gutsy if Obama could move against these costly entrenched state bureaucracies.
Uninsured
We hear that are between 40 and 50 millions Americans who do not have health insurance. Who exactly are these people? I have read that many are illegal aliens and over half of the uninsured make more than $50,000 a year. They can afford to buy insurance but prefer not to because they believe that they will get free or sharply discounted health care anyway. And quite a few others are eligible for Medicare of other government programs, but do not sign up.
Uninsured people do receive health care. Some pay for it on their own. But most go elsewhere. Many go to emergency rooms for treatment, which are mandated to take all comers, insured or not. In these cases it is ultimately the taxpayer and hospitals who end up paying their bills. Some uninsured patients get heavily discounted services elsewhere.
If we are already paying the tab for health care for most of the uninsured in one form or another, how come the Congressional Budget Office says that the Obama plan will cost over $1 trillion dollars over the next 10 years?
Preventable and Terminal Health Expenditures
I have read that up to one-third of all health costs are due to bad health habits, particularly smoking, overeating, lack of exercise and so on. I also have read the some businesses have introduced health plans that reward healthy lifestyles with lower health premiums. Current legislation prohibits insurance companies from denying coverage to those with "pre-existing conditions." But some of these conditions are due to the lifestyle of the patient and could be modified. Are there any incentives built into Obama's programs that encourage healthy behavior?
Furthermore, I have read that up to one-third of medical costs are incurred in the last few weeks of a person's life. Are all these expenditures necessary? Does Medicare's reimbursement system encourage overspending on hopeless procedures in the final days of a patient's life because they are reimbursable? I have personally seen situations where I believed that this has happened.
In fact, how much is our entire insurance system, both public and private, geared toward reimbursable procedures rather than better, but non-reimbursable treatments? Are there any measures in the Congressional bills to address these issues and control those expenditures?
Government Plans
I could envision a government-run health program providing basic coverage to any American who chooses to belong, even if it is subsidized by the taxpayer. And I don't believe critics who claim that such a plan will destroy the private insurance or health care system. I work in a private university system that flourishes alongside highly subsidized state-run colleges and universities. And there are other countries that have a socialized and private sector working side by side.
Yet I think the private sector would do best at providing care at all levels. Just as charter schools have been successful at providing innovative services in our highly socialized secondary school system, the government should allow private enterprise, freed from costly bureaucratic rules and regulations and shielded from excessive threats of litigation to show how it can reduce health costs.
Final Thoughts
It is true that Medicare is the big "budget buster" over the next two decades and that improving the delivery of health care will improve the long-term economic outlook. But why, in the midst of the worst recession in 75 years, do we have to rush into a mammoth reform of the health care system, especially one that will significantly increase our already swollen deficit?
Health care is contentious enough that Obama should not move ahead until he has some consensus. Perhaps he should appoint a bipartisan commission to study these issues come up with a set of recommendations.
To use Obama's own words, we need reform we can believe in, not just a new government program financed by higher taxes, new mandates and a trillion-dollar price tag.
