Health swamp

Eli Ginzberg

November 13, 1992|By Eli Ginzberg

THE Clinton administration will soon find out why health-care reform is so difficult.

The reason is that for most people the health system is satisfactory.

Although about one in seven has no insurance, most of the uninsured are children or young adults, who use physicians and hospitals rarely.

Another one in seven, on Medicaid, is likely to receive less than optimal care, but deficiencies also characterize his or her housing, income, food and education.

A further one in seven may face serious trouble when confronting catastrophic illness or injury because of shallow insurance coverage.

About two in three with good private health insurance or who are on Medicare are well covered when they need acute care.

Many are too well covered because the $65 billion annual tax subsidy for private health insurance enables upper-income employees to obtain more and better health-insurance coverage than they would buy with after-tax dollars.

Moreover, the affluent elderly get more benefits from Medicare than they contributed in taxes or premiums, especially Medicare B (payments to physicians).

Somewhere along the line Congress reduced the charge to beneficiaries from 50 percent to 25 percent of the annual cost.

In any case, the government subsidizes the more affluent sectors of the population, below and above 65, to the tune of about $85 billion annually. Any sensible reform will have to end part of this subsidy if Congress is to move toward coverage for everyone.

In 1980 America's total health-care expenditures amounted to $250 billion. Today the figure will be in the $810 billion to $820 billion range.

What's the rush for reform if the United States was able to increase its health-care financing by $560 billion in the short span of 12 years?

Moreover, we are on our way to piercing the trillion-dollar level by 1995.

The 9 million people employed in health care have no serious complaints.

Physicians on average earn about $165,000 a year after expenses but before income taxes. Most of the 5,200 acute-care hospitals still operate in the black even though their average occupancy is low.

Despite national stagnation in jobs and income, the health-care sector stands out with more job holders earning more in wages and fringes.

Medical schools have enjoyed a doubling in revenues, from $10 billion to $20 billion, during the past decade in the face of a 2 percent increase in the undergraduate student body.

The continuing flow of additional dollars into the health-care system has kept reforms on the back burner, but that era is coming to an end, and soon. We need to find a second trillion dollars between 1995 and 2000 to keep the system on its present trajectory.

That translates into an outlay of $30,000 for health care in 2000 for a family of four -- more than the family will have spent on food, clothing, housing and transportation combined in 1990. The second trillion will not be findable.

The private health-insurance industry is covering fewer Americans today than in the early 1980s, and it spends much effort identifying high-risk persons to avoid insuring or reinsuring them.

In addition, governors have petitioned Congress and the president to call a halt to the government's adding new mandates on the states to broaden Medicaid coverage.

Employers say health-care costs must be moderated if the United States is to regain its competitive position in the world economy. Workers face increasing pressures from employers to cover more of their insurance premiums.

The best way to summarize where we are, and are going, is to recall what C. Everett Koop, the former surgeon-general, said:

OC We are in crisis and not much will happen until we enter chaos.

Eli Ginzberg directs the Eisenhower Center for the Conservation of Human Resources at Columbia University.

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