By Paulo Campos
When President Barack Obama made his last speech to Congress on healthcare reform, the good news – the potential universal coverage – came along with bad news: the missed opportunity to expose and address the exploding healthcare spending.
Obama estimated that the plan would cost USD 900 billion over 10 years, offset by savings from money “spent badly in the existing health care system”, and the follow-up criticism targeted increasing healthcare expenditures without identifiable sources of funding.
While it is true that a debate build on stereotypes does not benefit the U.S., it is also true that moderating its tone does not allow the country to face the future challenges. The Congressional Budget Office had estimated in 2007 that without reform, healthcare spending would grow 1.7% faster than GDP to reach 40% of GDP in 2050; the ongoing recession makes the picture worse, not better.
Additionally, the existing proposals lack ambition. President Obama pointed to the fact that the U.S. spends close to 50% more of its GDP on healthcare than its peers, but the U.S. benefits from a young population and other qualities like a small proportion of smokers and a very efficient healthcare service in some aspects, like early cancer diagnosis.
Healthcare reform should clearly identify and address performance lagging segments of the system, such as inpatient hospital care. The U.S. spends on aggregate significantly more than its OECD peers, and public payers are particularly important in this category.
The CMS (Centers for Medicare and Medicaid Services) projects that MEDICARE/MEDICAID plus other federal and state payers will spend 55 cents of every dollar spent on hospital care, and that MEDICARE will be the largest individual payer. The sum of all private insurers will pay 36.4% of the category expenses in 2009, while MEDICARE will pay 28.8%. Finally, certain studies calculate U.S. hospitalization costs at 162% above OECD average per bed/day.
Under the existing plan, public payers would not provide effective incentives to improve the performance of care providers, nor would private insurance companies perform this valuable function, so long as they can pass costs along the chain. Effective incentives would imply setting harmonization of treatment practices, implementation of statistical systems and Electronic Health Records, and quality of care and outcome objective measures to reward best performance.
The exploding healthcare spending cannot be unwound by a moderate reform and companies, particularly around hospital care, which integrate or contribute to improved performance should benefit from upcoming changes.
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