More is Less or Less is More
Barack Obama talked somberly last week about getting the federal budget under control once the present economic crisis has passed. To do that, he’ll have to confront the rapid growth of health spending, which in 2007 was already a quarter of total federal spending of $2.7 trillion.
On paper, there are various ways to control health spending: stricter regulation of prices and the availability of care; “market mechanisms” to push consumers toward more efficient or skimpier care. All have foundered, because they cannot be used aggressively. The reason is politics. There is no major constituency for controlling spending. Because most patients don’t pay medical bills directly, they have little interest in using less care or shopping for lower-priced services. Providers (doctors, hospitals, drug companies) have no interest in limiting care. What others call “health costs” are their incomes — wages, salaries, profits.
Unless we rectify this political imbalance, efforts to control health spending may fail. We need mass constituencies that favor cost control. But our consistent policy has been to conceal the burden of health spending by burying it in untaxed corporate fringe benefits or government budgets.
We could change this. We could charge the elderly more for Medicare. We could tax employer-provided health insurance as ordinary income. We could create a dedicated federal tax to cover government health costs — if health spending increased more than revenue, the tax would automatically rise. People would quickly feel the costs of our present system. Of course, that would be unpopular, because it would compel Americans to face a discomforting issue — how important is health care compared with other priorities?
Will Obama be so bold? In the campaign, he proposed more, not less, health spending. It’s easier to embrace the rhetoric of change than change itself.