Bill Robinson, a health insurance agent in the Palm Springs area, sent me an interesting article last week. The article reiterates a key, but too often overlooked, truth about health care reform. Until lawmakers tackle the rising cost of health care, all the debate over health care coverage will eventually amount to little.
Take even the most extreme reform: a single payer system. Supporters claim that eliminating health insurance companies, agents and the rest of the private health care sector will provide enough money to support a government-run system providing everyone with virtually unlimited health care. They’re wrong, but for now, let’s give them the benefit of the doubt. What is likely to happen in, say, 10 years? Consider that cost of $1,000 worth of medical care in January 1997 cost over $1,470 in December 2006 according to Tom’s Inflation Calculator and it’s clear even single-payer advocates are going to have to come up with a boffo second act. A one time saving just doesn’t cut it.
Which brings us to the article Bill sent from Financial Week, “Cost of health-care system bugs employers”. The article points out the motivation for business executives to be fully engaged with health care reform. Of the $1.9 trillion in total health care spending in 2005, $694 million was spent on private health insurance premiums. Employers paid for $462 million of this, fully two-thirds. It’s a bottom-line issue for employers of substantial proportions.
Which is why folks like Andrew Mekelburg, Verizon Communications’ vice president of federal government relations complains that the presidential candidates are focusing on health care coverage, not health care costs. “Until you fix the system we’re all going to pay more,” complains Mr. Mekelburg. He notes that the health care system lags other areas of the economy in leveraging technology to increase efficiency and improve results.
Many of those interviewed in the article agree that achieving universal coverage is important. But as Helen Daring, president of the National Business Group on Health, puts it, “It’s ironic: the main reason people do not have coverage is because they can’t afford it….Politicians say, ‘we’ll get the coverage in first, and we’ll worry about the costs later,’ but you’ll never be able to do the cost part later.”
And that’s the crux of the matter. The reforms being debated in Sacramento and elsewhere are important. Some are necessary. Yet most miss the point that it’s constraining the cost of the underlying care that drives everything. Worse, some of the solutions being put forward could make things worse. Consider the pay-or-play approach of Assembly Bill 8, the approach favored by the Legislative Leadership. Ted Nussbaum, a consultant on health care coverage to large companies, offers this warning. “They have to prescribe the amount we spend. ‘You spend X% of your payroll on health care.’ … And when you set the amount it takes out the incentives for employers to come up with more cost-effective care. … [A mandate] leaves no room for innovation and flexibility and creativity.”
This is common sense. If the government creates the floor for spending on a specific item, why would anyone fight to make the cost of the item less expensive?
The debate today turns on who gets coverage and who pays for it. This debate needs to expand to include a discussion on how much we all pay. Until that happens no reforms, not even the most radical, are going to do more than put off the big accounting that is coming. And the longer we wait, the tougher corralling cost will be.