Inconvenient Facts (For Both Republicans and Democrats)

I call your attention to Ezra Klein’s column in the Washington Post this morning.

In it he cites data that has been out there for a long time but Ezra puts some perspective on it that never occurred to me before.

Examining the Kaiser Family Foundation brief, “Health Care Spending in the United States and Selected OECD Countries” he points out, “Our government spends more [as a percentage of GDP] on health care than the governments of Japan, Australia, Norway, the United Kingdom, Spain, Italy, Canada, or Switzerland.”

The data would seem to indicate that even our single payer government-run American health care programs, Medicare and Medicaid, cost way more than similar health plans in these nations.

The argument is often made that we should adopt a single payer—or perhaps a “public option”—health plan in the United States in order to control costs and cover everyone. But it would appear that even those programs in America are way too expensive when compared to similar programs in other industrialized nations.

As for the Republican market-based approach, Klein also points out that those programs have been ineffective at cost control. House Republican Paul Ryan often cites the Medicare Part D drug benefit as proof his proposals to privatize Medicare would work better than what we have. But as Klein points out, Part D premiums have risen 57% since 2006 and the program is on track to see nearly 10% growth in annual costs over the next decade.

And, the existing private Medicare Advantage program “ended up costing about 120% of what Medicare costs.” That’s a new data point for me. However, I do know that Medicare Advantage insurers in recent years have been paid at least 13% more than traditional Medicare.

My takeaway from all of this is that neither side has the answer to bringing America’s health care costs under control.

Liberals think that a single payer, or at least a “public option,” is the best hope and point to Europe and Canada as proof of that. But, as a percentage of GDP, the cost of our already run government health care plans rivals many of those nations’ entire government spending on health care.

Republicans argue we need to move entirely toward market-based solutions, but with two big market-based Medicare programs already operating, neither Part D nor Medicare Advantage has come close to demonstrating affordable cost growth.

But both Republicans and Democrats do have something in common—each is offering supposedly painless solutions. For the liberals, just put the government in charge and we will magically have affordable health care for everyone. For the conservatives, just put the market in charge and we will have a solution.

Painless solutions might be politically attractive, but the data indicates they will not get the job done.

Robert Laszewski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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GarmNate OgdenBobbyGJohn BallardDr. Rick Lippin Recent comment authors
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Maybe somewhat late for a comment…however: Government healthcare programs in the US covers nearly 1/3 of the population. Meidcare is over-65s, medicaid is the people who are sick already…these are by a very large margin the most expensive patients.

In addition, all healthcare programs in the US includes a very large bureaucracy working on billing and gatekeeping -functions that simply do not exist in Beveridge or NI model healthcare systems. And are heavily streamlined in Bismarck type ones.

Nate Ogden
Nate Ogden

Rob, You referenced some tortured abuse of statics, always a risk when quoting Ezra. “But as Klein points out, Part D premiums have risen 57% since 2006 and the program is on track to see nearly 10% growth in annual costs over the next decade.” This is a meaningless number. Your comparing one set of drugs, those available and filled in 2006, to those available and filled in 2011. The cost of generics has dropped substantially during that time, if we only covered generic drugs then bragged that Part D has lowered the cost of Drugs X% have we really… Read more »

John Ballard

Saying that “our government SPENDS…” may be technically correct but the phrase is misleading. A more accurate phrase would read “our government ADMINISTERS…” because funds collected from payroll taxes earmarked for Medicare are (or should be) separate from general revenue funds deriving from income and other taxes as well as federal “fees” and other income sources. That said, the phrase “our government administers…” would be even more accurate as “our government carelessly squanders…” since stewardship of those payroll tax dollars is so irresponsible. Make a mental note of this little factoid next time you watch an expensively marketed new designer… Read more »


“Health care is not a market commodity”

Can we even rationally assume that “market” has only one meaning? The Wild Oats guy argues that “shopping” for health care is no different than shopping for a flat panel HDTV or groceries or a car or whatever.

What is the proper moral underpinning of a “market”? Simply win/lose winner-take-all transaction outcomes in all cases where such are the unfettered upshots? Across the breadth of goods and services?

Dr. Rick Lippin

Of course “painless solutions” are offerred up by politicians whose fundamental goal is to get elected or re-elected.

Until campaign finance and election reform comes we are hopelessly stuck with these wimps

Gary Levin MD

It is almost impossible to compare market forces in the US vs other European countries, Canada. The population base of these nations pales in the shadow of the US health care system and budget. In truth the market in the U.S. is a regional one, with local factors affecting supply and demand. Medicare’s attempts to equalize and adapt to differing costs in regions in inadequate and poorly planned. Many of their demographic categories of rural, suburban, urban are dated, and lag ten years or more. This is due to the sheer size of the U.S. The U.S. is also culturally… Read more »