Monday, March 1, 2010

HEALTH REFORM --- Go Where the Money Is ….. and Go There Often

With the current functioning of the health sector industries, they will absorb every dollar that the population is willing to make available. The continual escalation in health spending will not be curbed until the consumers get ‘sick’ of feeding the health sector’s seemingly insatiable appetite for money and take action.

The health reform efforts need to consider bank robber Willie Sutton’s approach and focus on where the money is – and go there often. Many health reform proposals address financing systems with some insurance reforms but they have virtually no focus on the delivery of services where 90% of the costs are generated.

In spending over 17% of it’s Gross Domestic Product (GDP) on health care services, the U.S. is paying almost twice as much as other economies in the world. And ranking about 40th in the world in terms of mortality measures, the U.S gets marginal results. – The U.S. spends about a third more of its GDP on health Care than Canada does with a public sector health care approach.

As a percentage of GDP’s, developing countries spend about 7% whlie other developed countries spend about 11% -- China spends only about 5% of their GDP on health care. The U.S. government projections for $2.5 Trillion of health care spending in 2010 and almost 20% of the overall GDP by 2019 are shown in the following table:




($ Millions)

% of Total

($ Millions)

%of Total

Total Expenditures





% of GDP



Per Capita Expenses



Hospital Care





Professional Care





Nursing Home & Home Care





Prescription Drugs (Retail)





Other Medical Products





Most economists feel that with the U.S. population spending almost one fifth of the overall economy on the health industry reforms are needed to constrain these expenses. It is also recognized that the demand-side of the equation – the health needs of the population of 300 million people – must be addressed with the people taking responsibility for their own health and only use health related services when actually needed.

While some health insurance reforms are needed, the primary focus -- with a combination of actions at both the state and federal levels -- needs to address the delivery of services where 90% of the costs are generated. There are three fundamental and inter-related aspects that need to be balanced:

1. access - making programs and services geographically available on a timely

basis with adequate levels of financing,

2. quality - assuring delivery of evidence-based services including the

associated outcome effectiveness measurements, and

3. costs - based on reasonable transparent prices for value-added products,

programs, and services.

Health reform proposals focusing primarily on only on the access to health insurance will have limited impact on the cost of delivery of the health care services. A more comprehensive and cost-effective approach would respond to both the health and health care needs of the people with accessible quality services.

Private sector cost control initiatives are essential because the health sector is so and complex and expansive that government actions alone will have limited impact. Some federal legislation is needed to set standards for payments (e.g. Medicare). However, legislation also needs to be put in place on a state-by-state basis where issues like Health Exchanges and Medical Practice Acts can be addressed.

The entrenched health sector special interests - primarily health care providers, health insurers, and pharmaceutical companies -- have become problematic for the economy, in general, and for health reform, in particular. The undo influence of these special interests needs to be checked and redirected through both the private and public sectors. However, the public sector elected 'representatives' seem to be responding to the special interests - not the actual needs of the people.

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