The US is facing a major crisis in the cost of health care. Corrected for inflation, health expenditures in the public sector are nearly doubling each decade, and those in the private sector are increasing even more rapidly. According to virtually all economists, this financial burden, which is now consuming about 17 percent of our entire economic output (far more than in any other country), cannot be sustained much longer. The federal share, including payments for Medicare and Medicaid, was 23 percent of the national budget in 2009 and is a prime cause of the deficit.1
There is no current prospect of raising taxes. If the federal long-term debt is to be reduced, government health expenditures on Medicare and Medicaid must be controlled. However, there is no agreement in Washington on how that can or should be done. Both parties claim to have the answer but, as I will make clear, no initiatives proposed by either party have much chance of significantly slowing the rise in federal health costs without reducing access to needed services. Major reform will be required, but that is not even under consideration. In any case, health legislation is currently stalled by a bitter political deadlock. No initiatives to improve health care will come out of Congress until after the 2012 elections and, unless the results are unexpectedly decisive, probably not even then. Still, as I will explain here, there is a chance that new developments in the way physicians are organizing themselves to deliver care might improve the currently dismal prospects for action on major reform and cost control.
In his September 8 address to Congress, the President spoke of the urgent need to control the costs of Medicare. To do this he is relying principally on the Affordable Care Act, passed by Democrats in March 2010. The Act expands insurance coverage but, as already explained in these pages,2 it is not likely to slow the rise of costs significantly. Republicans in Congress are seeking to stop it from being implemented and their potential candidates for president are demanding its repeal, while state governments that are controlled by Republicans are challenging its constitutionality in federal courts. They question the Act’s mandate that all citizens not covered by public or private insurance plans be required to purchase private insurance or incur a tax penalty. The Republican legal challenge has so far received a divided reception in lower courts and will probably reach the Supreme Court next year. The mandate is a critical part of the Act because private insurers will not offer coverage at affordable prices to all applicants, as the Act assumes, unless everyone—young and healthy included—is required to be insured. Whatever the Court’s decision, it will not…
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