Florida Health Insurance Topic:
"America's Health Care System"

IS AMERICA TOO BIG TO INSURE

The U.S. health-care system is the world's largest. It accounts for nearly 16 percent of the economy. Today one in eight workers is employed in the health-care industry compared to one in 100 in 1950. The industry has been nearly recession proof. In the nine downturns we have experienced since 1985, the industry lost jobs only in the 1980 and 1984. Despite horrendous job losses in the current recession, jobs in the health-care industry are still growing, but at slower rate.

The industry is also a world leader in research and innovation. In last 10 years nearly two-thirds of Nobel prizes in medicine have been awarded to scientists working in U.S. research laboratories. The industry has also been a magnet for venture capital money, the life blood of innovation in an economy. U.S. health-care companies remain open to innovations in most phases of their businesses.

There are other positive features in the U.S. health-care system relative to what is available in the rest of the world.

First, health care services and technologies are easily available to those who are insured. Second, the waiting time for surgeries, such as hip replacements, is much shorter than in most countries in the world. Although we now frequently hear dramatic stories about medical tourism in Thailand and India for elective surgeries, nearly 40 percent of the world's medical tourists seeking acute elective treatments come to the U.S.

But there is the proverbial fly in the ointment and it is a big fly. Despite its excellence in many areas, it also happens to be the most expensive system in the world.

On a per-capita basis, we spend more money on health care than any of the rich countries of the world. A recent study of health care spending by rich nations concludes that the U.S. spends nearly $650 billion more than its closest rival Switzerland, according to The McKinsey Quarterly.

The billion-dollar question is: what extra value are we getting for the additional hundreds of billions we spend relative to the other rich nations of the world? Undoubtedly our best hospitals are world class; many of our patients with insurance receive state-of-the-art medicine and have to wait less to see a doctor. But the U.S. lags behind the rich countries and even many not so rich countries in terms of two well accepted broad measures of well being of a nation — life expectancy and infant mortality.

The 2008 data on life expectancy at birth shows that for the U.S. it is 78 years. We rank 46th in the world and lag behind countries such as South Korea, Finland, U.K., Germany, Belgium, Austria, Norway, Spain, Israel, Sweden, Canada, France, Singapore, Hong Kong, Australia, and Japan. As far as infant mortality is concerned, we do not do well either. Latest data show that at 6.26 deaths per one thousand live births, we are behind Cuba, Italy, Taiwan, Greece, Ireland, Canada, the UK, Australia, Denmark, South Korea, France, Japan, and Sweden, according to the CIA — The World Fact Book.

Although important, the macro performance of our health care system mentioned above is not an urgent concern at this point. The pre-eminent concern is that our health-care system is fast becoming economically unsustainable.

In the last several years, the growth of health care cost has outstripped the growth of the economy as well as the per-capita income of workers.

The premiums of commercial health insurance policies, mostly paid by employers, have skyrocketed. In the last 20 years the cost of a health-care policy for a family of four has more than doubled. This is a huge financial burden for households who are self-insured as well as businesses that provide health care insurance benefits for their employees. It is also a huge burden for large government programs such as Medicare and Medicaid.

Today the unfunded liability for Medicare stands at an astronomical $36 trillion. The financial burden for Medicaid for the states is such that it will need nearly 75 percent of new state tax revenues to stay afloat, according to the U.S. Centers for Medicare and Medicaid Services.

To compound our health care problems, more than 46 million Americans, or 18 percent of the population under the age of 65, are now uninsured. Millions face premiums they may not be able to pay.

In 2007, nearly one-third of our businesses did not offer health insurance and that number is expected to rise in the foreseeable future as insurance policies continue to become unaffordable for small businesses.

The system is in a crisis and undoubtedly needs reform. What makes sense will be the focus of my next two columns.

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