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Health Care Costs

Half of America skimps to pay for health care. The only fix is to cut waste.

In our poll people said they could spend only 2% of their income on health. Putting doctors on salaries would be a good way to start cutting costs.

Arthur “Tim” Garson Jr.
Opinion contributor
Grundy, Va.

As Congress decides the fates of Americans who cannot afford health insurance, our new data shows that this is a larger group than previously thought.

In a new survey of 9,200 people across 15 states by my organization, the Texas Medical Center Health Policy Institute, 49% of respondents said they must cut other expenses to pay for health care. And they aren’t cutting back on frivolities like expensive electronics. Most often, they said, they had to cut back on their savings, as well as spending on food and clothing, to pay for health care.

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But the real shock was just how little respondents said they could afford to spend on out-of-pocket health care expenses. Well over 50% of the uninsured put that number at just 2% of their income. We saw a similar trend with the insured population, too. Almost half of insured respondents earning more than $100,000 said they could only afford to spend 2% of their income on additional out-of-pocket costs. Across the spectrum, it seems 2% is the magic number.

Why does that matter? It sheds light on one of the most important provisions that the Affordable Care Act got so wrong. Obamacare defines “affordability” as 8.2% of income. Anyone who has access to a plan where premiums cost less than 8.2% of their income, and declines that insurance, must pay a tax penalty, known as the individual mandate. It’s a stunning disconnect. The government says affordability is more than four times what the people themselves consider affordable.

Congress is considering new bipartisan legislation that permits states to apply for waivers that “provide coverage and cost-sharing protections against excessive out-of-pocket spending.” It’s clear many Americans don’t agree with the current Obamacare definition of “excessive out of pocket costs” being 8.2% of income. Across the board, only about 10% of uninsured people — whether they’re high-earners or low-earners —can afford to spend that much on health care, according to our survey. So replacing the current “cost sharing reductions” to help people buy insurance actually aren’t enough.

But the legislation also requires that the government spend no more money. What to do? The real solution is less expensive health care. Neither Obamacare nor more recent attempts at reform address the rising cost of health care in a substantive, rational way. Recent congressional proposals that increase the number of uninsured by more than 20 million don’t address that problem. Neither does President Trump’s plan to support association health plans, which have provided skimpy care that cheats people. Consumer Reports said these plans were “so riddled with loopholes, limits, exclusions, and gotchas that [patients] won't come close to covering their expenses if they fall seriously ill.”

So here’s the real fix: cut the waste. Former Medicare and Medicaid chief Donald Berwick and RAND researcher Andrew Hackbarth calculated in a landmark April 2012 article that we waste up to one-third of our health care dollars. That’s about $1 trillion every year. A large portion of that sum is due to over-treatment, driven by a system that pays doctors for each test and procedure they perform.

What, exactly, is over-treatment? In West Virginia, a patient is seven times more likely to have a heart procedure than in San Francisco. Those West Virginians are no sicker, and don’t have better health results, than the San Franciscans, suggesting many didn’t need the costly procedures in the first place. There are many similar examples of such over-treatment.

We can fix this problem by removing the incentives to do more and more. Start now. For example, all physicians should receive salaries, instead of payment based on volume of tests and procedures they perform. In some of the best health care systems in the United States, including the Mayo Clinic, Cleveland Clinic and Kaiser Permanente,  physicians are paid a salary. Payers such as Medicare and major insurers could offer bonuses to health systems that put physicians on salary.

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The savings from just this one approach could provide significantly more funding than we spend on Obamacare’s insurance subsidies and Medicaid expansion, which cost $110 billion last year. This step could reduce the number of people receiving entitlements and put us on a path towards being able to afford coverage for all. What could have more bipartisan appeal than that?

Nearly half our respondents said a candidate’s stance on health care will greatly impact their midterm vote. Lawmakers need to get this right or plan on a new career.

Arthur “Tim” Garson Jr. is a pediatric cardiologist, former medical school dean and director of the Health Policy Institute at the Texas Medical Center in Houston.

 

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