What Health Care Costs
Ezra Klein has yet another op-ed in WaPo on health care in which he outlines a state of facts that one would think is beyond dispute and then leaps to conclusions that are quite disputable. The title of the piece is “You Have No Idea What Health Costs,” which is likely true for most people, and the subhead is “If You Did, You Might Just Want Real Reform,” which is true but rather begs the question.
These are the facts of the case. And they are undisputed:
The average health-care coverage for the average family now costs $13,375, according to Kaiser. Over the past decade, premiums have increased by 138 percent. And if the trend continues, by 2019 the average family plan will cost $30,083.
About 160 million Americans receive health coverage through their employers. In general, the employer picks up 73 percent of the tab. This seems like a good deal. In reality, that money comes out of wages.
Another 80 million Americans are on public plans, mainly Medicare and Medicaid. Those costs are paid by taxpayers. And about 46 million Americans are uninsured. The costs for their care are shifted to the insured: This raises premiums for the average family by $1,100 each year, according to an analysis by Ben Furnas and Peter Harbage of the Center for American Progress.
Health care costs are out of sight and trending upwards at an unsustainable rate. And most people are, for now, largely insulated from this because the costs are largely hidden from us. We pay our portion of the insurance premiums, deductibles, and co-pays. Everything else is irrelevant in our decision process aside from services. This, combined with a fee-for-service model, incentivizes pretty much everyone to demand more tests, procedures, and pharmaceuticals since they’re “free.”‘
Ezra figures that, if we made the costs more transparent, we’d consume less. Which is likely true. Unfortunately, as he rightly points out, all the proposals on the table for doing this are rather unpopular or unlikely to actually do anything about costs. But he figures we can save tons of money with small changes: Speed up transactions, centralize and digitize record keeping, “bundling” vice fee-for-service, and so forth. Oh, and figure out what treatments offer marginal benefits and stop paying for them.
Some of this makes sense, some not so much. Most notably, going from a system where everyone feels entitled to every conceivable treatment even if the odds are long to one where the government decides that the benefits don’t merit the costs will be wildly unpopular.
Moreover, as Dave Schuler points out once again, “there isn’t anything in any either the House bill, H. R. 3200, or Max Baucus’s bill that would materially change” the current information disparity. And:
Those who argue that a public option is a necessity for reducing costs are essentially proposing that they’ll fix costs in such a way that they go down. If the set price is lower than the market clearing price, it will create a shortage. If the set price is higher than the market clearing price, it will create a glut and will be a sub-optimal use of resources, stunting economic growth.
So, we’ve got an obvious problem. And no obvious, politically workable solution.
Graphic: American Consumer News