A system in crisis.

• Author: Riczo, Steve
• Position: Health Care

HEALTH CARE concerns consistently rank near the top of surveys of Americans pertaining to issues that are important to them. There is good reason for concern. Compared to other industrialized nations, health care in the U.S. is much more expensive.

The average spending of the 30-member nations of the Organization for Economic Cooperation and Development (OECD)--other than the U.S.--as a percentage of gross domestic product is 10.6% vs. 15% in the U.S. Our per capita health care costs are close to $5,635, approximately twice the average of other OECD nations, including Canada ($3,003), Germany ($2,996), France ($2,903), Australia ($2,699), the United Kingdom ($2,231), and Japan ($2,139). As a nation, we spend more than $5,-000,000,000 per day on health care; that is a staggering two trillion dollars per year. The Center for Medicare and Medicaid Services projects health care spending to exceed four trillion dollars annually--20% of GDP--by 2015. Moreover, the U.S. lags behind other advanced economies in a number of outcome measures, such as infant mortality and life expectancy.

Not only do other industrialized nations spend less, they manage to do so while providing health care coverage to all of their citizens. Canada, for example, has a publicly financed delivery system that utilizes a national insurance plan that covers basic and supplemental benefits coordinated by provinces and territories. Great Britain's system is based almost entirely on tax revenues provided primarily by its National Health Service. Japan's national health insurance requires some personal contribution determined by employment and age. Germany's compulsory health insurance was established more than 100 years ago, and shares administration among governmental and nongovernmental bodies. Israel's Ministry of Health coordinates compulsory membership for its citizens in one of four plans that offers a mandated package of basic medical services. In the U.S., however, more them 40,000,000 individuals remain uninsured.

Spending on health care is not the only determining factor of good health. For instance, this country has an ever-widening disparity in its distribution of income between the rich and poor, and studies have demonstrated lower health status in states with the largest disparities. It has been shown that there is a direct correlation between poverty and certain health risk factors, including drug and tobacco use, teen pregnancy, victimization from violence, sexually transmitted diseases, and alcoholism. Money spent on health care does not solve societal issues that contribute to poor health. As tar as universal health coverage is concerned, a number of proposals have been put before Congress, but none have passed.

One of the most significant contributors to high health care costs is our current system of insurance and reimbursement, which distorts the fundamental economic principles of price, supply, and demand. When a consumer purchases a house or an automobile, he or she usually will shop carefully in order to get the best value. Not so with health care, as a majority of insurance plans pay most of the expenses, making price less relevant.

An aging population and more advanced technology are contributing factors to rising health care costs as well. As people get older, they simply have more need for medical care. Remember, too, that even though high-technology care is expensive, it is exacerbated by the fact that medical innovations are not evaluated consistently by health insurers using scientifically based formulas that include cost-benefit analysis. Effective use of technology--such as computerized axial tomography or magnetic resonance imaging--actually has reduced costs by precluding expensive procedures such as exploratory surgeries. If used wisely, technology has the potential to act as a countervailing force to an aging population.

While factors relating to aging and technology must be taken into account, they serve to obscure a much more important factor: the vast majority of health care expenditures are related to payrolls in health care organizations, not for high-tech medical equipment. Health care is a labor-intensive industry that continues to employ a system riddled with inefficiencies and subject to political manipulation--namely lobbyists who represent clients with insatiable appetites for government funding, which ultimately drives up the cost of insurance.

Our system of insurance coverage is highly variable and consists of a mix of plans that can be broken down into several...