Health Care: The Disquieting Truth

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Warner Bros. Television/Everett Collection
Joely Richardson and Dylan Walsh in the television series Nip/Tuck

1.

Most experts agree that the central problem with the US health care system is its high cost. We can’t afford universal coverage unless there is much better control of medical expenditures, which are now reaching over $2.5 trillion per year. What’s more, without effective control of health costs the federal budget deficit and the national debt will continue to increase. Nevertheless, our political leaders have decided to expand and improve insurance coverage first, while deferring any serious attention to costs. Moreover, as I will discuss in the second part of this review, the book by John E. Wennberg demonstrates that in many parts of the US, costs are driven up by an excessive supply of medical services.

In March, after more than a year of bitterly partisan congressional debate, a narrow majority of exclusively Democratic lawmakers passed the most extensive health care reform since Medicare and Medicaid were enacted forty-five years ago. As described by Jonathan Oberlander and Theodore Marmor in these pages,1 the main thrust of this extensive legislation is to provide federal aid for mandatory expansion of coverage by Medicaid and by private insurance plans, and to expand benefits under Medicare. It has also been promoted by its sponsors as a measure to control costs, but it is not. Oberlander and Marmor make very clear that there is little reason to expect it will do much in the near future to control the relentless rise in health expenditures—a task that must wait for future reforms.

Another major defect in the new health legislation is its failure to change our current dependence on private, for-profit insurance plans—a young but now dominant industry that scarcely existed a few decades ago. By mandating and subsidizing the purchase of private insurance for almost all those not eligible for such government programs as Medicare or Medicaid, the legislation has created a virtual monopoly for the private insurance industry. True, the law also restricts some of the industry’s worst practices, such as denial of coverage because of preexisting conditions or rescinding coverage because of an expensive illness. However, it imposes no effective controls on the price private insurers can charge for premiums, which undoubtedly will continue to rise. For example, insurers will be allowed to increase premiums by a maximum of threefold simply because a policyholder has reached a certain age.

Before paying doctors and other providers of care, investor-owned health insurance companies now spend as much as 15 to 30 percent of their premiums to cover their many overhead costs, which include extravagant salaries and bonuses for top management, dividends for shareholders, and retained corporate profit. The new legislation puts limits on this overhead, but the total bounty extracted from the health system by the industry will surely increase because of a greatly expanded market…


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