President Obama has placed health care reform high on his domestic agenda. He believes that a better health care system is essential for the nation’s economic recovery, so health reform “will not wait another year.” However, he has made only general proposals for reform, leaving Congress to work out the details of the legislation. The Democratic-led Congress has already passed some limited health legislation and its leaders say that they will put a comprehensive reform bill on the President’s desk before the end of this year.
Despite wide popular support for major reform, there will be powerful opposition. Most Republicans in Congress, allied with a small band of fiscally conservative “Blue Dog” Democrats, and most people in the for-profit health care industry will resist significant change. Many others with ideological objections to “big government” pay lip service to reform, but will balk at proposals that threaten private insurance. Compromises will be necessary, so it remains to be seen what legislation emerges and how effectively it addresses the basic problems of the US health system.1
The central problem is its expense. Health care in the US is about twice as expensive per capita as in other developed countries—nearly 17 percent of US GDP in 2008—and its costs are rising faster. High costs partly account for another huge health care problem—nearly 50 million people are uninsured, and the number is rapidly increasing. Economists say that the main reason for high costs is the ever-expanding use of expensive kinds of diagnosis and treatment, such as new drugs, diagnostic tests, imaging methods, and surgical procedures. Physicians in most other advanced countries have access to virtually the same resources, but use them less.
This difference is partly explained by a higher proportion of specialists in the US, who rely more than primary care physicians on expensive technical procedures for their livelihood, and in general are much more highly paid than primary care physicians—one reason why primary care doctors are now in short supply. The American College of Physicians attributes much of the high cost of the US health system to its relative excess of well-paid specialists and lack of primary care doctors.
There are also much greater financial incentives in the US to use technology, since health insurers pay doctors and clinical facilities most of what they charge for such services. In most advanced countries with universal coverage, the government determines how medical expenses are reimbursed, and the income of health care providers from technical services is therefore more modest. Also, relatively more practicing physicians in those countries are paid salaries, and relatively more hospitals (where most advanced technology is concentrated) are controlled by government budgets. This limits the availability and use of expensive technology.
Another very important but often overlooked reason for greater health expenditures in the US is that, more than in any other advanced country, large parts of the system are owned by investors.…
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