Issue 2: Affordable Healthcare

10 Issues to Consider in the Months Ahead

This is the second in a series of posts to come between now and Labor Day about ten key issues we face as Americans and need Congress to lead us to solutions on. At the end of the series, we will publish a survey aimed at uncovering the issues that matter most in each district in the country

#2: Affordable Healthcare

And I thought understanding income distribution was complex. Getting one’s head around the challenge of affordable healthcare in this country is difficult, understanding what to do about will be much more so. But we have to figure it out and, once again, any meaningful progress will at least require a concerted approach by Congress instead of ideological entrenchment.

Here’s the basic problem, and this part is pretty simple. As discussed earlier this week, for most Americans wages and income have been stagnant for a decade. But healthcare costs have not. They have been rising…fast. Since 2000, the U.S. GDP has risen 28 percent, the Median Household Income has decreased 6.6 percent and healthcare costs? According to the World Health Organization,  overall per capita national-health-expenditures-per-capita-1960-2023-healthcosts_kiexpenditures on healthcare in this country were $9,146 in 2013…up 90 percent since 2000. By this measure the United States has the third most expensive healthcare system in the world (behind Norway and Switzerland) and it is not really close to any other country. Add this to the fact that the largest demographic generation in the United States, the Baby Boomers born in the years following World War Two, are working their way through their fifties and sixties and that we are not a particularly healthy nation at any age group and you’ve got the makings for a very serious problem. Oh, and the USA is also virtually alone among the countries in the developed world in not providing universal healthcare coverage.

Health_Expenditure_per_capita_OECD_2013
It is telling that in an age of epidemic apathy, healthcare has gotten lots of attention in the last few years. The 2010 Affordable Care Act (Obamacare if you prefer) has become one of the most polarizing pieces of legislation  enacted in this country in decades. But the irony is, the debate over the ACA, while all-consuming for some politicians, has always been about whether or not the treatment of the symptom is helping or not- like whether our aspirin is working, not why we have a persistent and recurring headache in the first place. To understand that, it is instructive to look at the alternative models being used to deliver healthcare in other parts of the world.

Five Global Approaches

Here is an excellent full description of four main types of healthcare systems practiced in the world (though I’ve added a 5th) – its a pretty short page and worth reviewing. But to summarize:

  1. “Single payer” (Beveridge) systems, where the government pays for all healthcare costs for all citizens out of the taxes it raises and provides all the services, similar to other public services such as roads and police. The U.K, Spain, Norway, Sweden and New Zealand are examples of countries using this approach.
  2. Regulated “multi payer” (Bismarck) systems where insurers pay healthcare costs and are funded through employer and employee contributions. This is similar to the U.S. system with some main differences – it is universal, health insurance plans have to cover everybody, they are not for profit and they are heavily regulated. Germany, France, The Netherlands, Japan and Switzerland use this approach.
  3. National Health Insurance. This is also a single-payer, universal healthcare system but it uses private sector providers and payment comes from a government-run insurance program funded by citizens. Because all payments come from one central source, like most single payer systems, the ability to negotiate prices can significantly lower costs. Canada, Taiwan and South Korea practice this approach and the U.S,. Medicare system functions in a similar way (without quite the same price negotiation benefit.)
  4. Out of Pocket Coverage. In most of the developing third world there is no central healthcare policy and citizens pay for whatever healthcare they can afford out of their own pocket.
  5. Hybrids. The United States system  is a hybrid of these; (actually all four of them) so is Russia’s, which purports to provide some healthcare to all citizens. In Australia a universal publicly funded healthcare system covers everyone but wealthier individuals are encouraged to get off the government system and buy private insurance themselves, which also offers a much broader menu of care options. Finally, in the small country of Singapore exists, at least according to this Forbes article, one of the best examples of a “market driven” approach to healthcare. The government mandates that all citizens pay about 20 percent of wages into a health savings account which are then used to pay for all the inpatient services they can afford, while outpatient services are paid for with cash, or in some cases – private insurance. Services are provided by the private sector that compete with each other for customers in the same way other businesses do.

The arguments for this approach, often labeled Consumer Driven Health Plans (CDHP,) goes that because people have to pay for their own healthcare they are more likely to shop around for the best deal (and thus to create a market to provide less expensive services) and that they are less likely to get costly procedures they don’t really need. Because it functions as a single payer system it also avoids the administrative overhead created by insurance companies. The fairly obvious questions about this approach would be – do citizens also elect to skip procedures they do need or would protect their health in the future because they can’t afford them and does cheaper care equate with less quality care.

On the other hand, proponents of transitioning to a government-run single payer system argue that by taking the third party insurance companies and all their inherent bureaucracy and administrative costs out of the mix ((30 % of the overall healthcare cost is a number that gets cited frequently) they are successful in lowering costs while still providing a high standard of service. They also do this through negotiated contracts with providers that lower costs across the board, which is the reason the same drug generally costs less in many parts of the world, including notably Canada, than it does in the United States. Opponents of a single payer system call it “socialized medicine,” which carries with it a stigma first seen in this country a half century ago during the depths of the Cold War despite the fact that government healthcare is no more inherently socialist than public roads and schools. Critics of this approach also contend that government healthcare causes long waits for service and more difficult access to it. It also seems quite likely that without some type of a private insurance option on top the universal program many people in this country would lose coverage for a lot of services they are now entitled to. Finally – there is room for debate about whether a single payer system would actually save money at all in this country.

Ironically, the system that many healthcare system experts on both sides of the political spectrum point to as exemplary is Switzerland’s – a multi payer government subsidized approach to buying insurance from private insurance markets (exchanges) with an “individual mandate” that everyone has to have insurance. Sound familiar?

But one of the most challenging aspects of what to do about healthcare costs is one of the least discussed politically. It demands the question – should we be careful what we wish for? The healthcare industry is an enormous part of the U.S. economy. In many, perhaps most of the 435 congressional districts around the country the local hospital or health system is the largest employer.  The Health Insurance industry is worth more than a trillion dollars annually in its own right,  not surprisingly it has a very powerful lobby.  With healthcare costs rising across the world (this is not a U.S.-only problem) it may  be difficult to  positively impact cost without at least scaling back profits in that industry. Do we have the political will for this?

Questions to Ask

In order to make any progress at all. it seems clear that we need members of Congress and candidates for their seats to be much more specific and collaborative about how to approach this problem than the anti Obamacare rhetoric that currently dominates political discourse. By 2010, before the Affordable Care Act was passed, per capita healthcare expenditures in the United States had already risen by 72 percent in a decade. The roughly three percent increase each year since then actually represents slowed growth in that number. Let’s ask candidates why we have this headache not whether we are taking the right aspirin.

  1. What can be done to slow the cost of healthcare in this country?
  2. If you answered, replace Obamacare – replace it with what?
  3. If you want to modify Obamacare – how?
  4. Why will your approach lower healthcare costs for the average American?
  5. Are there examples of other countries using this approach?
  6. Why do you think almost all other developed countries spend less per person on healthcare?

Next up – Education for the 21st Century

Issue 1: Jobs and The Economy

10 Issues to Consider in the Months Ahead

This is the first in a series of posts to come between now and Labor Day about ten key issues we face as Americans and need Congress to lead us to solutions on. At the end of the series, we will publish a survey aimed at uncovering the issues that matter most in each district in the country

#1: Jobs & The Economy

I am calling the first issue “Jobs & The Economy.” It is labeled this way because it is the language that almost every current member of Congress uses on their web site. Not surprisingly it has also become a dominant focus in the first months of the 2016 Presidential campaigns, though as I will point out, I’m not sure most of the candidates are really talking about the aspect of the issue I’m guessing most people care about.

This is, though, a guess and I want to describe it as such. I am guessing that a great many, probably most, American citizens care about an improving economy and job creation. I expect it to be one of the central issues of this election cycle. But I am also guessing that the reason this issue matters to most people is that they would like to see more money in their own wallet and savings account. …and this is where the the early rhetoric in the campaign (and if we’re not careful in the 2016 congressional campaigns) differs from what we actually care about.

Earlier this month Jeb Bush and Chris Christie both suggested that they would “grow the economy” by four percent per year if elected. Translated to most accepted views on what constitutes “growing the economy,” this would mean growing the Gross Domestic Product by four percent. By way of comparison the GDP grew at 2.4 percent (adjusted for inflation) in 2014 and last reached four percent growth in 2000.  Not surprisingly, the media jumped on this story and began the debate on whether this was or was not possible. It’s interesting and reading through these arguments will provide interesting perspectives on the overall financial prospects of the country.

annual-growth-in-real-gdp-feb-27

But none of the accounts I saw asked a question that seems reasonable to me…why would the average person care? Sure – “The Economy” (GDP) growing gives us a national sense of well being. It is the number the world uses to measure economic success. But for the average American household, which takes in about $52,000 per year, there has not been a statistical correlation between GDP growth and household income for decades. The GDP goes up almost every year. In some years growth is higher than it is in others but the GDP has only gone down from one year to another three times since 1980 (two of them in the Great Recession.) Since 2000 the “Real GDP” of the United States (inflation adjusted) has grown by 28 percent.

GDP or MHI…Oh My

The Median Household Income is a different story. As a reminder,  median looks at the middle figure in a list of figures rather than their statistical mean (average) and many  organizations, including the U.S. Census Bureau and Bureau of Economic Analysis measure and refer to MHI as it provides one of the clearest pictures of how individual Americans are doing financially.  In the same time period (since 2000) in which GDP has grown 28 percent, the Real (inflation adjusted) Median Household Income has actually decreased 6.6 percent and is down almost nine percent from the year before that. In fact, until a very modest increase in the most recent figure, (2013) MHI has gone down every year since 2007 and in all but three years since the turn of this century. Combined with faster than inflation increases in healthcare and housing that leaves most people in this country quite a bit worse off financially than they were a decade ago.

Gdp_versus_household_income

To save you the trouble of reading the very helpful, if somewhat dry, Primer on GDP and the National Income and Product Accounts produced by the U.S. Bureau of Economic Analysis, there are some differences between Gross Domestic Product and Gross National Income, (GNI) which used to be called Gross National Product. The latter takes into account income received from activities based outside the USA but they are generally similar and have risen at about the same rate historically.  The latter figure is used to calculate the Median Household income. Who cares?

Wither $370 Billion?

Well, at a 2.4 percent growth rate, about $370 billion was added to income in this country last year. If that number was divided equally among households, each would have made a bit more than $3,000 more than the previous year. If the MHI just grew at the same modest 2.4 percent, the average household would have received $1,272 more. Instead, that average household made $335 more and this is the first year since 2007 it has made more at all. Our system of government is not designed to distribute wealth equally but that staggering disparity ought to beg the question, why would the average person ask politicians what they are going to do to improve the economy instead of asking what they are going to do to improve their income? With all the lip service given to “fighting for the middle class,” why do politicians (and the media that covers them) focus so much more on income most Americans will never see. It’s a rhetorical question  and any answer we got would likely be equally rhetorical.

Other Questions to Ask

But I would propose asking candidates (and looking for the answers to) a set of very specific questions like these:

  1. What do you propose to do to raise the Median Household Income in a meaningful way?
  2. How much growth in this number is realistic in the year ahead…two years, four years ahead?
  3. What are the barriers in the way? Why haven’t we done this before?
  4. If new programs will create this growth, how much will they cost and where will it come from?

Beware of general language like “we’re going to focus on job creation” or “were going to reduce taxes and allow businesses to create jobs.” The former is too vague to be meaningful (What kind of jobs? How much will they pay? Who will be qualified for them?) and the latter isn’t supported by evidence.

The unemployment rate (5.3 percent in July) has been decreasingly steadily since a high of 10 percent just after the Great Recession and in 2014 more jobs were created in this country than in any year since 1999. From 2010-2014 – the U.S. economy added more than 10 million jobs.  In that five years, Real Median Household Income has increased by a total of $358 (.06%).

Also, reducing taxes isn’t the same as increasing income – it is an inherently regressive activity.  As anyone who does the household books can attest, figuring out a way to make more instead of spending less is a lot more fun.

productivity-vs-wages-parted-waysWhat will make wages actually increase and the rate of income inequality slow in this country? There are a variety of theories. Former Secretary of Labor Robert Reich lists several causes and potential solutions in his recent documentary Inequality for AllA Harvard Business Review article  entitled Profits Without Prosperity from economist William Lazonick last year decried the increase of corporate stock buybacks and suggested they are responsible for the decoupling of productivity, which has risen fairly steadily since World War Two, from wages, which began to level off in the 1970s and have been stagnant for almost two decades. Both are deserving of a read – both can and should also be debated.  What can not be debated is that for the vast majority of Americans income has barely budged over the 15-year course of the last two presidencies, one Republican, one Democrat – both two term.  Whether the next President, regardless of who it is, is able to do anything about that will have everything to do with how the candidates for the House and Senate next year answer the questions above. Let’s ask the questions and judge for ourselves whether they were answered in a believable way.

Next up – Affordable Healthcare