Updated 4:16 p.m. ET
Though we’ve narrowly averted debt-ceiling mania, our favorite congressional characters are still tasked with arriving at a sustainable budget. That process is sure to bring debates over entitlement spending, again! It’s true that U.S. healthcare costs contribute to the debt and are out of control. And it’s true that we need to do something about it. But cutting coverage, the favorite solution of politicians on both sides of the aisle, won’t solve America’s ballooning healthcare costs.
Our three trillion dollar health care sector functions as a market. There are suppliers that provide products and services (doctors and companies that sell medications and devices), there are consumers (like you and me), and there are purchasers (insurance companies and the government). In purchasing health coverage for the military, elderly, and disadvantaged, the U.S. government accounts for two-thirds of all health care expenditures. Amidst heated partisan political battles, our Congressional representatives keep proposing to manage the country’s debt by cutting the government’s commitment to provide health care coverage for seniors (Medicare) and the disadvantaged (Medicaid). What our politicians aren’t seeing is that this blinkered approach won’t improve health and is actually business-unfriendly to boot.
Cutting coverage does not equal efficiency. Firstly, cutting doesn’t address the underlying causes of healthcare costs. And secondly, paying for health in this country is not something that can be simply switched off – at least, not without serious health and economic consequences.
To address these problems, we need progressive solutions, of which there are at least three: investing in prevention and wellness; paying for quality, instead of paying for every service; and reforming the pathway from suppliers to consumers and instilling competition to prevent monopoly pricing.
Cutting coverage is meaningless if it doesn’t address the underlying cost drivers. America’s healthcare costs are a function of the volume and price of health goods and services. Let’s look at Medicare as an example to understand what drives costs. In terms of volume, one out of every three older adults has three or more chronic conditions, and over seventy percent of Medicare spending goes towards their care. Having multiple conditions also increase risks of depression and mental illnesses, which in turn worsen these patients’ health issues. The age-old fee for service model, where suppliers get paid per product or service rendered, perpetuates the high volume of services. It’s understandable: if you were paid by the surgery, you’d want to do as many surgeries as possible, too. To add to that, pricing of products and services are inflated. In healthcare’s complex supply chain, there are “middle man” businesses that add margins and administrative costs at every step, such that the final prices charged to payers have a lot of “extra fat” in them.
Cutting coverage is also unfriendly to businesses. Medicare accounts for 3% of this country’s entire economy. Cutting coverage for older adults won’t only have impacts on their health, it will also have implications for industries, jobs, and the economy. Studies have shown that reduced coverage, which means higher co-pays and out-of-pocket costs, results in people using fewer health services. If this happens, the suppliers of health products and services will lose a large chunk of their revenues. This will surely have detrimental effects on these businesses and employment.
So, cutting coverage isn’t the way to address costs. It is more constructive and creative to invest in the long-term health of Americans through prevention and wellness. A recent report on the state of U.S. health in the Journal of the American Medical Association showed that a quarter of all deaths and 14% of disability in this country are related to poor diets and low physical exercise. Studies show that lasting lifestyle changes (eating healthier, exercising more regularly, quitting and avoiding tobacco) are possible to achieve and are cost-effective ways to lower risk for heart disease, diabetes, and cancers – the highest costing conditions in this country. They even preserve mobility, prevent depression, and keep you sharp. Policies and community programs can help us all achieve these wellness goals. And for the elderly who may already have these diseases, these lifestyle changes can lessen the effects of diseases like diabetes, and improve quality of life; so, even the highest risk, most costly patients’ costs may be lowered in the long-term.
Paying for quality may also have important long-term benefits. Would you rather have twelve sub-standard pairs of shoes that fall apart, or two pairs of higher-quality shoes that last you for years?
It must be said that preventive services aren’t free. We do have to invest now to see benefits later. However, growing a market for preventive services “grows the pie” and stimulates competition, a more business-friendly way to manage costs.
Cutting might seem like the necessary, noble choice. But, it’s not the smart one, or the most humane one. Let’s not put well-deserved healthcare coverage out of reach for seniors who have paid a lifetime of taxes, veterans who have served this country bravely, and the disadvantaged who are going through tough times. The most successful business strategies are rarely just about cuts – Apple and Google derive creative solutions to everyday problems through investments, not cutting.
Less is not always more, and as in medicine itself, a Band Aid isn’t as effective, in the long term, as prevention. Let’s not get hung up on pruning and patching-up health care. Let’s recognize the coming trends, and let’s make proactive steps to lower health costs. Let’s support growth of a preventive services market by expanding coverage, get behind reforms that promote efficiency of services, and improve well-being for millions of Americans.
Ali is an Assistant Professor at Emory University and Public Voices Fellow with The OpEd Project. A Rhodes Scholar with degrees in medicine, public health, and business administration, his work focuses on diabetes and heart disease worldwide.
“Stock Photo: Closeup Portrait Of Healthcare Professional Holding Up Piggy Bank In Front Of His Face, Isolated On White Background” on Shutterstock