The current condition of our health care system must certainly be described as serious, if not critical. Until recently, opinion polls had found it at or near the top of domestic concerns. Although it has been displaced by the economic meltdown, there is still good reason to be very worried about health care. Costs continue to rise at an unsustainable rate. Nearly 46 million people are uninsured and many more are unable to afford the growing gaps in their coverage; and the quality of care received by most Americans is far from optimal. Both Senators John McCain and Barack Obama have plans to cure these ills. To evaluate them, we need first to understand some facts about the current system.
There are two parts to the health care system. The first concerns the sources of funding and how care is insured. The second part concerns the actual delivery of care by physicians, hospitals, and other medical facilities, and how these providers are paid. I refer to all of this as the “delivery system.”
Some 160 million people are insured privately on a tax-exempt basis through their employer or the employer of a family member. Most private insurance is sold by for-profit investor-owned companies through contracts with employers. These companies take 15 to 25 percent of the premiums for their own profits and business expenses before paying for medical care. The physicians, hospitals, and other providers, in turn, have large additional expenses in billing and collecting from multiple insurers. About 40 million people are covered by Medicare, and a nearly equal number by Medicaid. Other government programs cover ten million people or so, and a dwindling number of people buy their own insurance. Although government programs cover less than a third of the population, government bears more than half the cost of health care, if tax exemptions for employment-based insurance are counted.
The delivery system not only provides medical services, but has a major part in determining what services will be provided. Physicians are the most important element in the delivery system, because they make most of the decisions on the use of resources and facilities—prescribed medicine and the use of X-rays and CAT scans, for example—and they provide much of the actual care. Physicians are paid largely on a fee-for-service basis, which gives them incentives to provide more services and to use procedures for which they receive high reimbursements, such as surgical operations and high-technology diagnostic tests. Incentives to maximize income also influence the decisions of hospitals and most other medical care facilities, as well as the powerful companies that manufacture drugs and devices ranging from syringes to MRI scanners.
More than anywhere else in the world, medical service in the US is considered by the people who control it to be a commodity in trade, and health care is seen as an industry. Given the opportunities for profit, and the constant introduction of new and more expensive procedures, tests, drugs, and medical devices, it is easy to …