Healthcare reform has finally made its way through the U.S. political machinery, emerging with a $1 trillion reform plan extending health insurance to 32 million additional Americans and eliminating other barriers to healthcare insurance.
To be sure, it’s a good start: America has finally joined the world’s other developed nations and made healthcare a national requirement for most citizens. However, there is a real risk that we have traded one problem for another.
The healthcare reform law – formally, the Patient Protection and Affordable Care Act (PPACA) – does very little to address the underlying costs and structural issues that have driven healthcare costs to rise at about 2 ½ times the annual rate of inflation. Adding 32 million people to these bad economics will place additional stress on a system that continues to swell. Failure will lead an existing $2.5 trillion industry to inflate to more than $4.5 trillion in 2019, according to The Centers for Medicare and Medicaid Services, and further weaken the U.S. economy.
The Senate Finance Committee pushed the likelihood of mandatory U.S. healthcare insurance a giant step forward this week by passing a healthcare reform bill that is likely to become law in some form by year-end. That’s the good news. Unfortunately, this is dwarfed by the bad news: The focus of the legislation is the implementation of healthcare for the uninsured, not fixing the healthcare system overall. So the need to substantially trim crippling U.S. healthcare inflation rate is getting lost in the shuffle.
Healthcare premiums have soared because healthcare inflation is nearly triple the overall inflation rate. Last year, during a period of general deflation, healthcare inflation rose 5.5 percent. Healthcare costs are expected to consume nearly 20 percent of the GDP by 2017, the year that Medicare is projected to become insolvent.
While there is still time, policy makers must take steps to substantially amend the nature of healthcare reform. They must set clearly articulated goals, including a normalized healthcare inflation rate. They must build alignment across multiple interest groups to make sure that all key stakeholders are truly on board, not just passing legislation. Most important, they must shift the focus of the debate from “who pays” to “how much” America should pay for an effective healthcare system that delivers real value. If this isn’t addressed, no changes will ultimately succeed.
In the campaign of 2008 and the first six months of 2009, the call for healthcare reform has been a refreshing and important theme. It has been widely recognized that
1. Healthcare costs are out of control. You cannot have healthcare expenses inflating at 8% in an economy that is growing in the best of times at 4%. (today, the current inflation rate is negative 1.3%)
2. 47 million Americans need coverage
3. 14,000 Americans lose their insurance everyday
4. Medicare is in peril, and along with Medicaid, the combination of ever-increasing costs are the main drivers of this government’s budget deficits that threaten our economic future.Continue reading…