Timothy T. Taylor Home Page
Journal of Economic Perspectives
Articles and Writing
Economics Textbook
Classroom Teaching
The Teaching Company
High School Pedagogy

Articles and Writing

September 26, 1993
"So Much Care (And So Much Money)"
San Jose Mercury News
By Timothy Taylor
<< Back to 1993 menu

IN HIS health care address to Congress, President Clinton said: "This is not a free system. There can't be any such thing as a free ride. We have to pay for it." Then he repeated, for emphasis, "We have to pay for it."

We're certainly paying through the nose right now. America will spend about $940 billion on medical care this year. Whether measured in absolute dollars, or spending per person, or as a share of gross domestic product, this is far and away the highest level of health care spending for any nation. Although only 5 percent of the world's population lives in America, this nation consumes 41 percent of global health care spending, according to the World Bank.

The most prominent guarantees of Clinton's health care plan would raise this figure still higher.

Begin by assuring health insurance benefits as generous as those typically provided by Fortune 500 companies to every American. This involves both providing insurance for the one-sixth of all Americans now without it, as well as expanded coverage for those with relatively skimpy policies.

In addition, Clinton proposes expanding the available benefits. He included mental health benefits for all and prescription drug benefits for Medicare patients. He plans to phase in insurance for long-term care, dental care and more. Of course, the home care providers, chiropractors, podiatrists, acupuncturists, herbalists, and every other healing profession will be clamoring to be included.

As Clinton emphasized, high medical care spending is already harming the U.S. economy. It is creating a fiscal crunch for government at all levels, making it harder for U.S. business to compete in global markets, and sopping up money that could otherwise have gone into wage increases or capital investment. So how are we going to pay for the additional security promised by Clinton's plan?

One possible answer is to take a tough line with the pro-paperwork lobby, and call for simplicity and efficiency. Easier said than done, of course. Clinton is proposing the creation of state-regulated regional health alliances, new taxes and subsidies for various businesses, collecting information for "report cards" on health plans, and a wide variety of federal and state mandates.

Even with his promise of a single simple form for health insurance claims, it requires a certain optimism just to believe that paperwork won't get worse under such a plan.

Moreover, even if the proposal can scuttle enough paperwork to save, say, $100 billion per year on the nation's medical bill, America will still be spending far more than any other country, any way you measure it, and medical spending will still be rising rapidly.

Clinton also promised that regional health care purchasers, negotiating on behalf of consumers, will hold down costs. It should help, over time. But many large purchasers exist already -- including Medicare, Medicaid, Blue Cross/ Blue Shield and large health maintenance organizations -- and costs have been rising rapidly anyway.

The other proposals for saving money are substantially less credible. Clinton trotted out the old warhorse of avoiding fraud and abuse. He has promised Medicare and Medicaid savings, but without any clear notion of how they will come about. He argued that covering the medically uninsured would save money, by catching health problems earlier. But any such savings will not come close to outweighing the additional costs of giving 37 million uninsured people greater access to medical care.

If the promised savings don't materialize, only two possibilities exist for taking up the slack. One is to find someone who will pay. The likely possibilities seem to include tobacco users, businesses, and perhaps younger workers. While I strongly support higher cigarette taxes, making businesses and workers pay more is part of the medical cost problem, not part of the solution. The other option is to cap medical care spending, either by placing a lid on health insurance premiums or on overall spending. Without such caps, Clinton's plan seems unlikely to hold down spending.

In his 53-minute address Wednesday, Clinton never quite got around to explaining the most fundamental reason America has such extraordinarily high spending on medical care. It's not paperwork. It's not gluttony, sloth, a predilection for violence, or some other moral failing. It's not fraud or greed or price-gouging by businesses.

Such factors all make a contribution. But the basic reason America spends so much on medical care is, simply enough, because Americans receive so much care, especially of the high-technology, high-cost variety.

Patients, understandably, want everything done that might benefit their health. Medical care professionals, understandably, want to do everything they can to help their patients. But no society, not even the richest in the world, can afford for every person to have every technologically possible diagnosis and treatment, regardless of cost.

Holding down medical expenditures will require health professionals and patients to confront hard decisions about which types of medical care and new technology will be delayed, or available only at additional cost to the patient, or largely unavailable. When it comes to controlling medical costs, the controversy over these choices will be where the rubber hits the road.

<< Back to 1993 menu