Making Health Care Dollars Go Further

Oct. 16, 2006 — -- We spend more than 16 percent of our gross domestic product on health care, and that number is expected to rise to 20 percent in 10 years. Federal spending on Medicare, Medicaid and Social Security is projected to double as a share of GDP in the next 40 years.

Health insurance premiums have risen more than 75 percent since 2000, more than 50 percent faster than inflation and more than twice as fast as wages.

Given the enormous strain that increases in health care spending put on both public and private budgets, it is vital that we get the most value for our health care dollars, and evidence suggests that right now we are not.

We spend roughly twice as much per capita on health care as other developed countries, without commensurately better health outcomes. We see the same story across different regions of the United States, and the parts of the country where Medicare spends the most are the least likely to receive effective, high-quality care.

With such a high fraction of our national resources going to health care, it is imperative that we get better value for our investment. This will in the long run make health care more affordable for everyone, opening health care and health insurance to more people.

The reason our spending has risen so rapidly is not because we go to the doctor more often or stay in the hospital longer but because we are treated more intensively once we are there.

While our current system promotes life-saving advances in medical technology that must not be discouraged, it does not encourage the development of cost-saving technology, and it does not encourage the highest-value use of our current technology.

One of the key problems with our private health insurance system is a tax code that penalizes people who choose basic insurance coverage over gold-plated plans.

Premiums for employer-provided insurance are paid with tax-free dollars, while most people who don't get insurance from their employers or who choose basic plans and cover routine care on their own do have to pay taxes on their health care. This pushes people into insurance policies that leave patients with little incentive to seek out high-value care and leave health care providers with little incentive to compete for their business.