Changing The System

By Author: Marcus Stalder
Total Articles: 491
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If there was a truth drug we could secretly administer to all politicians, you would almost certainly hear them agree the current health care services are broken. The reason is easy to state. As it stands, doctors and hospitals operate under the fee-for-service system. This gives them a direct financial incentive to do more work than may be strictly necessary. Even though they may explain everything to the patient and get "informed" consent, not all the tests are strictly necessary and many of the procedures they recommend have little chance of improving patient outcomes. So the best way to improve health care in this country is to change the incentives. Instead of paying for more care, we should be paying for better quality care.

Yet if you look at the proposals made by Rep. Paul Ryan, the Republicans are now committed to changing the cost base of health care. In particular, they want to change the entitlements our seniors have under Medicare. It's undoubtedly true the service is buckling under the rising burden of spending. Way back in 1965 when we created Medicare and Medicaid, the government spent 2.6% of its budget ...
... on health care. Last year, our government spent 26.5% of its budget on health care. If you look at the projections published by the White House, President Obama is projecting this will rise to 30% by 2016. To give you a context, the projected spending on our defense is only 20% of the budget. Just think, all those weapons and people, fighting wars in Iraq and Afghanistan. Something has to be done to bring costs under control.

The unanswered question is how you can bring out-of-control spending under control. For Medicare, Ryan proposes introducing a voucher system in 2022. He believes that, if you give our seniors control over their own budgets, they will seek out the lowest-cost medications and treatments. If you do that to the 48 million seniors expected to be a part of Medicare in ten years time, this will either make or break the system entirely. But there's no guarantee seniors will have the knowledge and determination to insist on less waste in the system as a whole. Take a simple example. If the effective treatment is ten pills spread over five days, will patients refuse twelve pills? Now scale that up across all treatments. It would be far better for government to regulate, setting national care standards so that our health care service only offers treatments where the evidence clearly shows them to be effective. This is the European approach where the public purse will only pay for the treatments approved by their local quality assurance departments.

Whatever is done, it should be quite radical. Medicare spending has been increasing by an average of 9% per year over the last thirty years. It's not practical for our individual health insurance plans or the government-funded plans to continue meeting these annual increases. Something must be done to reverse this trend. There's no sign the Affordable Care Act will seriously address this issue when implemented. This will leave our health insurance industry with the challenge of either increasing premiums every year, or doing the job of government and fighting for cost reductions.