Written by Cheryl Jacque
Global Economic Intersection recently posted about “The Healthcare Paradox” in an article that called to mind the seemingly endless red tape associated with U.S. healthcare reform. But regardless of where you fall on the political spectrum, you can’t deny that Americans will be consumed with health care debt in 30 years if nothing changes, as Cheryl Jacque explains below. Cheryl is an expert on healthcare administration who regularly writes for http://www.healthadministration.org/, a website devoted to higher education for healthcare administrators.
Rhetoric and hyperbole has largely dominated the health reform conversation among the legislation’s proponents and detractors. While virtually every American requires medical care of some sort during their life and will thus be affected by sweeping changes, very few could ever be expected to read through the 2,700 page healthcare document. Yet, even without knowledge of every regulation, a look at the numbers reveals a great deal regarding who is most affected by the Affordable Care Act, and how health reform will affect our economy.
Regardless of political leanings or personal feelings about the Obama administration’s health reform plan, nobody in Washington can deny that health care in the U.S. is becoming increasingly unsustainable. In 2010, U.S. health expenditures neared $2.6 trillion, over ten times the $256 billion spent in 1980. Though the rate of growth has slowed since the early 2000s, it is still expected to grow faster than national income over the foreseeable future. A 2012 study published in the journal Health Affairs identifies hospital care and physician and clinical services as eating up 31% and 20% of U.S. healthcare costs, respectively. That’s over half of the nation’s health expenditures.
Exactly how successful the Affordable Care Act will be in reducing costs is still speculative, though the Congressional Budget Office has estimated the legislation could reduce the deficit by $143 billion over the first 10 years. Within the following decade, the CBO projects deficit reduction of more than $1 trillion, though even the office itself stresses the uncertainty of such long-term predictions. The Obama administration is hoping one measure, called comparative effectiveness research, will be a major factor in reducing the health industry’s long term costs. The measure will be funded by $500 million or more a year that is set aside by the federal government for studies showing which drugs, devices and medical treatments work best.
Proponents of the measure argue that by using statistics-driven research methods, comparative effectiveness will bring an increased scientific rigor to medical decision-making that is too often influenced by tradition and marketing. A new payment system for doctors, which penalizes hospitals for high readmission rates and creates an independent commission to evaluate which treatments are paid for by Medicare is also expected to raise fiscal efficiency.
A national study by the Dartmouth Atlas of Health Care suggests that $700 billion in annual savings could be achieved by eliminating wide disparities in the cost of similar procedures. The study was highly influential for Peter Orszag, President Obama’s budget director. “Huge efficiencies could be gained if we change the way we practice medicine,” said Orszag in a 2009 interview. While health care reform is imperfect, it is already affecting positive change for some 32 million Americans who are expected to receive health insurance under the new law by 2014.
However, even with reform, if health care expenses continue to increase at the current rate, they will consume the average American’s entire paycheck by the year 2037, which clearly indicates that the current bill is still a work in progress. Further discussion and compromise are necessary on the part of Congress, insurers and medical professionals before effective and lasting reform is reached.
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