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June 2009
Hmmm…health care special interest groups coalesce…
By John Paul Galles

     President Obama has made clear that, “When it comes to health care spending, we are on an unsustainable course that threatens the financial stability of families, businesses and government itself.” He has repeatedly affirmed that “controlling health care costs is essential to getting the federal deficit under control.”

     Interestingly, on May 11, 2009, President Obama received a letter from the collective interests of medical technology, insurance providers, hospitals, doctors, drug companies and health care workers offering initiatives to reduce the annual growth rate of health care spending by 1.5 percent, which has been projected at 6.2 percent. Altogether, they projected savings of $2 trillion over the coming decade.

     What is particularly specious about their offerings of change and cost cutting initiatives, is its timing. It seems that the only time health care groups are heard from is when they are trying to halt or blunt political efforts to dramatically change or alter the health care system.

     Those same groups came together to stop the Clinton administration from reforming health care in 1993 and 1994. While Hillary Clinton’s dogmatic approach to systemic health care reform was confrontational and virtually intransigent, these powerful groups were significant opponents of reform.

     These related interest groups joined together to fight Clinton’s reform because they realized that the rate of health care spending increases at that time could not be sustained. So, in place of reform, they banded together to put forward and expand “managed care” programs to contain health care spending.

     Managed care programs were structured to provide a variety of techniques to reduce health care costs and improve quality of care. These techniques were created under a collective form of health care coverage called Health Maintenance Organizations or HMOs and Preferred Provider Organizations or PPOs. Patients were herded into these groups as an alternative to proposed government-organized entities. Nevertheless, health care spending still outstripped annual growth of the gross domestic product (GDP) by 2.4 percent.

     Health care spending in the United States was $2.4 trillion in 2007 or $7,900 per person. Total health care spending represents approximately 17 percent of the GDP. With costs growing by 6.2 percent per year over the next decade, total spending is likely to reach $4.3 trillion in 2017 or about 20 percent of GDP.

     The average annual premium charged by a health insurer for a health plan covering a family of four was about $12,700 in 2008. Workers contributed an average of $3,400. That premium is higher than the gross earnings for a full-time, minimum-wage worker ($10,712). Since 1999, employer premiums have increased 120 percent compared with inflation growth of 44 percent and wage growth of 29 percent over the same period.

     It is no wonder that President Obama and the Congress are working toward major reform of our health care system. Even without change, the costs of maintaining our health care system are destined to substantially grow over the next decade given anticipated increases in Medicare spending for baby boomers reaching their ’60s. Neither businesses nor individuals can afford the increases that are predicted.

     Yes, we applaud the initiatives for cutting costs, but real cost containment will only be realized through systemic reform that causes the payers of health care premiums—businesses and individuals—to apply the discipline of examining costs and participating in health care decisions that limit or reduce spending to rein in overall costs.

     Simply spending more money does not deliver better health care. Any changes in our health care system must require all of us to be more intelligent consumers of health care and more equal distributors of health care.

     We can improve our lifestyles. We can improve our eating habits. We can improve our physical activity. We can stop smoking. We have lots to do. Our current system does not reward those changes in behavior. And yet it must.




John Paul Galles is the publisher of Greater Charlotte Biz.
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