Health economist calls for new realism in US healthcare funding

BMJ 2009; 339 doi: (Published 05 August 2009) Cite this as: BMJ 2009;339:b3165
  1. Bob Roehr
  1. 1Washington, DC

    The costs of health care in the United States have doubled every 10 years for the past 40 years, a Princeton University health economist told a Capitol Hill briefing on 31 July.

    Uwe Reinhardt said, “The supply side of the [healthcare] sector seems to assume that the continuation of that trend is a firm social contract between them and the rest of society . . . that from here to kingdom come we will double your revenue every 10 years. Any deviation from that [growth curve] is viewed as a giveback.”

    Dr Reinhardt said that proposals for Medicare to cut anticipated growth of its total spending over 10 years (a total of $11 trillion (£6.5 trillion; €7.6 trillion)) by 1.4% has sent the healthcare industry into a rage. “It makes me worry about America, that health care couldn’t manage the type of cuts we are talking about.”

    Dr Reinhardt also lambasted as “incredibly wasteful” the current practice of insurance payers individually negotiating reimbursement rates with individual providers at the state or local level. He has proposed that the process be greatly simplified.

    He would also end the practice of large companies providing health insurance for their employees as part of untaxed compensation and instead have individuals contracting directly with a private or government health insurer.

    Some healthcare reform advocates have argued that soda drinks (fizzy sweetened drinks) contribute disproportionately to the obesity epidemic in the United States (see News, BMJ 2009;339:b3176, doi:10.1136/bmj.b3176). They have suggested that a tax on soda drinks (or, more broadly, on sugar) would help to reduce sugar consumption and associated medical problems, even while generating substantial revenue.

    But, as the former congressional staffer Bill Hoagland pointed out, sugarbeet farmers are an important constituency of Montana’s Max Baucus, the Democratic chairman of the Senate Finance Committee. Meanwhile, corn farmers play a similar role for Chuck Grassley, the committee’s top ranking Republican. They are not likely to do anything that will constrain the demand for sweeteners, he said.

    Mark McClellan, the physician and economist who led the Food and Drug Administration and later the Medicare programme in the Bush administration, is optimistic that some members of Congress are reconsidering a bipartisan package of reforms that were proposed in June. These promote high value and high quality care; facilitate access to health insurance; emphasise personal responsibility for wellness; and suggest solutions to long term financing needs.

    Dr McClellan said that most of the reform proposals currently in Congress deal with issues of accountability and quality but that they largely ignore giving greater flexibility to the Medicare and Medicaid programmes, particularly in coordinating care for so called “dual eligible” people who are entitled to benefit from both programmes.

    He believes that reform will have to include taxing health insurance as income. Currently it is exempt. Issues of inequality can be addressed by adjusting the tax rate to reflect differing geographical costs in health care, he believes.

    “From a fairness standpoint, I really can’t think of a better policy,” Dr McClellan said in commenting on the reform package he helped to develop. “Only about 1% of the cost will be borne by households with incomes under $50 000,” while most of the subsidies to acquire health insurance will go to the same lower income groups.


    Cite this as: BMJ 2009;339:b3165

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