Flatlined: Resuscitating American Medicine

Chapter 17. No Coverage Expansion without Cost Control

The cost of providing health insurance for the uninsured is not trivial, but it amounts to less federal money than is spent on any other single federal program or industry subsidy. In addition to what hospitals, doctors, the public, and the uninsured themselves already spend on the uninsured , the United States could cover them for an estimated 73 to100 billion dollars (in 2004 funds).1 Consider that the nation spent 2 trillion dollars on health care in 2004; less than 4 percent of that figure would be sufficient to cover all of the uninsured. The cost is less than the federal portions of Medicare and Medicaid and less than half the tax subsidy for employer-based coverage.2 Unnecessary hospital and doctor services account for one-third of Medicare spending. If this figure is extrapolated to the 2 trillion dollars spent annually on U.S. health care, then 700 billion dollars a year are wasted—money enough to cover the uninsured seven times over. Clearly, in the large scheme, covering the uninsured is not a particularly large cost. But as with the proposed Medicare for All Act, using federal money to cover the uninsured could be a fiscal bomb if it is not combined with a serious effort to reduce health care costs. Before the passage of Medicare, only about one-quarter of seniors were insured, meaning that hospitals lost money caring for seniors as they do today caring for the uninsured. 201 17 No Coverage Expansion without Cost Control The inability to manage health care cost may be a greater obstruction to covering the uninsured than any other single cause. CH017.qxd 10/7/08 10:09 AM Page 201 Therefore, the hospital industry tacitly approved, or at least did not oppose, the creation of Medicare. The American Medical Association, on the other hand, pulled out all stops to oppose its passage, believing that government intervention would ultimately cost doctors their independence. Fearing government control, the AMA threatened a boycott if Medicare were enacted, which gave rise to the “reasonable and necessary ” criterion for covered services—in other words, anything a doctor wants. The hospital industry made a wise choice in not opposing Medicare. The research of Dr. Amy Finkelstein has found that Medicare’s cash infusion resulted in a 37-percent increase in hospital spending in the first four years after its enactment. Half of the growth was from new hospitals and half from increased use of existing hospitals.3 Finkelstein believes that Medicare’s great contribution was to reduce the risk of out-of-pocket spending that could bankrupt the elderly. It also increased their life expectancy. She estimates that covering the uninsured today would reduce a state’s fraction of uninsured by about the same amount as Medicare did forty-three years ago.4 Today’s uninsured are younger and healthier than the patients who entered Medicare in 1965, so they might not increase hospital spending as much as Medicare did. Nonetheless, Finkelstein’s data raise the question of whether or not covering the uninsured would further escalate all health care spending by fueling the profitability and expansion of the entire industry. My conclusion is that coverage of the uninsured must be accompanied by a serious effort to manage the cost of the entire U.S. medical industry. Despite the additional cost and aside from any moral or ethical considerations , the uninsured should be covered sooner rather than later for four reasons: ■ Hospitals pay for uninsured care by cost shifting, thereby increasing insurance premiums. ■ Too many uninsured make key hospitals financially unstable and dangerous. ■ Too many uninsured cause emergency services failure. ■ The medical care of the uninsured is substandard, leading to higher health costs in the long run. REFORMING AMERICAN HEALTH CARE 202 CH017.qxd 10/7/08 10:09 AM Page 202 Who Really Cares? During my year and a half in Washington, D.C., I listened to members of Congress, analysts from think tanks, and lobbyists talk about health care financing and the uninsured. I heard three explanations of why the uninsured have not been covered in the United States: differing partisan political ideologies, public apathy, and lack of anyone willing to pay. All three reasons were discussed at a March 2007 hearing of the Senate Finance Committee on Health Care Reform. Sitting on the dais behind the senators, I observed that three of the committee’s four witnesses looked comfortable...