Healthcare is Eating the World

By far the biggest issue in America is healthcare. Whatever your cause, you need to help fix healthcare first.

Two charts make this case hard to refute.

Source: Kaiser Family Foundation analysis of Truven Health Analytics MarketScan Commercial Claims and Encounters Database, 2005-2015; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2005-2015 (April to April)

Source: Kaiser Family Foundation analysis of Truven Health Analytics MarketScan Commercial Claims and Encounters Database, 2005-2015; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 2005-2015 (April to April)

We always hear about wage stagnation, but wages are actually rising—the gains are just getting eaten up in healthcare benefits which do not show up as wages. Worker and employer costs are rising rapidly for health benefits. And even when workers end up earning more in spending power, much of it goes to healthcare in the form of deductibles and other costs.

An entry-level employee in my business ends with 20% of their salary going to health costs (more if they have a family). So if health costs rise 10% (not an unusual increase in recent history), a 2% rise in salary is 100% eaten up by health benefits. And, with healthcare results not increasing, all these increase in costs come with no real benefit.

And our government? Well, they too are swamped covering healthcare. It is overtaking every other expense with no end in sight. We are headed to 30%+ of our budget being eaten by healthcare and these numbers only include direct healthcare programs, not the costs eaten up inside other big programs whether the military, research investments or education expenditures.

Source: Congressional Budget Office, CRFB extrapolations

Source: Congressional Budget Office, CRFB extrapolations

So, people who are working hard and succeeding feel no better off. And the government, which has big problems to solve—education, transportation, R&D, climate—has to give all incremental dollars to healthcare. If you care about any other program, from social justice to military intervention, you need healthcare costs to be solved first. There is just not going to be money for your program if we keep on the current track.

Despite facing this reckoning, we are not getting solutions. The left is obsessed with universal coverage. This is a noble end, but like any other new program, we need lower costs to make it viable. The right, well, they are not in the game. Ever since Sarah Palin’s abhorrent (but effective) lie of “death panels” the right has used fear of healthcare reform as a political weapon.  

Costs have to be our obsession. We spend too much—almost 50% more than any other country on a per capita basis.

Source: Kaiser Family Foundation analysis of data from OECD (2017), "OECD Health Data: Health expenditure and financing: Health expenditure indicators", OECD Health Statistics (database)

Source: Kaiser Family Foundation analysis of data from OECD (2017), "OECD Health Data: Health expenditure and financing: Health expenditure indicators", OECD Health Statistics (database)

The only real proposal on the table to lower costs is Medicare for All. Ever since we removed “pre-existing” coverage as a factor in insurance coverage, the real value of insurance companies—assessing risk—has been minimized. Furthermore, Medicare costs are lower on average than private insurance.

But, politically, Medicare for All is not happening. It’s a wholesale overthrow of the current system. It is just not feasible. Our skepticism of government in America is too strong. Doctors are too powerful. And a unified force of special interests will blunt it. As Uwe Reinhardt pointed out, “Every dollar of waste in the healthcare system is a dollar of income for some provider.” They won’t give up easily. Not to mention, universal coverage remains the primary benefit of Medicare for All. Solving the cost issues require deeper thinking.

We need a hardcore push to incrementally get the cost curve bending back. Obamacare actually contemplated some real cost cutting programs—pay for impact, evidence-based payment boards even the healthcare mandate—but failed the final bill or have been weakened since passage. The program fell back on dealing with coverage. Costs were for another day. That day must be now.

To get this done, we need fewer grand plans and more small, wonky ideas that chip away at the problem. With small gains, we will end up in a place where bigger decisions can be made. The left and right have many of these ideas that, in isolation, could pass into law. With a laser focus on lowering costs, each could get things done.

Patent reform on drugs, more pay for service, fewer large hospital and drug mergers, tort reform, testing effectiveness standards, provider licensing reform, behavior-based pricing, cross border insurance plans, patient data standards and portability, giving Medicare negotiating powers, doctor-drug incentive reform, advertisement reform, telemedicine regulations, and many more ideas exist—each of which could make a difference. These are unsexy, technical changes. No one can win office on any one of these tactics, but they can on a total commitment to lower costs and tangible plans to get there.

Americans are going to demand progress on healthcare costs. They are fed up with their income being eaten up and their government held hostage. Each side could deal to get some of their wish list done. But, we need leadership ready to make lower healthcare costs a priority. If it gets done, our options expand. We can then fight over the money we get back and what to do with it—pay debt, fund schools, expand coverage, massive infrastructure investments. Those are the fun debates. But the healthcare overhang will haunt us until we turn the cost tide. Let’s see who steps into this debate with real, doable solutions.