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Health Care Costs

PROLOGUE

Health Care Costs


PROLOGUE: Recent news on the health care cost front has not been good news, and forecasts indicate a return to double-digit premium increases and a general upswing in health care spending. In the first of a group of papers examining health care costs, Steffie Woolhandler and David Himmelstein renew the effort to muster support for a single-payer system with a recalculation of current public expenditures for health care. By including the value of the existing tax subsidy for private insurance and of premiums paid for public-sector employees, Woolhandler and Himmelstein figure that 60 percent of the nation’s health bill is now paid for with public dollars, in contrast to the usual estimate of 45 percent. Since government spending on health is already so high, they conclude, the new tax revenues that would be needed to finance a universal public system are much less than opponents have argued they are. Moreover, the inefficiencies in the current system could be improved with rational and transparent public funding, and savings on administrative expense would help to cover the uninsured.

In the first of three responses to the paper, Uwe Reinhardt addresses the more immediate issue of privatizing Medicare. Neither the privatizers nor the single-payer advocates have produced convincing evidence that the system they favor will be more equitable and efficient than the one they oppose, he says. Stuart Butler agrees with Woolhandler and Himmelstein that the current system is unfair and inefficient and that the federal tax subsidy for employment-based private coverage is a central problem. But Butler favors converting the tax subsidy into a system of refundable tax credits. Jonathan Oberlander doubts that the recalculation of public spending gives much help to single-payer advocates. Vested interests, political fragmentation, and public caution militate against radical change, while reformers’ obsession with Canada blinds them to more viable options.

Benjamin Druss and colleagues explore an equally fundamental but much less frequently discussed dimension of health care costs in their analysis of the relationship between spending levels and the relative burden of disease for the most costly and prevalent conditions. The authors find that the most costly conditions are not necessarily the most disabling and raise thought-provoking questions about how priorities should be set and resources allocated in light of this disconnect.

Finally, Anne Martin and colleagues from the Centers for Medicare and Medicaid Services present authoritative state-by-state data on health spending in 1991 and 1998, adjusted for border crossing and broken down into Medicare and Medicaid spending as well as total per capita outlays. This is the first time the agency has presented such data since 1991. While geographic variations in Medicare spending have been studied exhaustively, these methodologically consistent tabulations of public and private totals provide an important new source of information for policymakers.


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