To set the mood:
“Over the past two months, Congress has approved some $2.4 trillion to combat the coronavirus crisis and the resulting financial fallout…And more could be on the way as Congress mulls additional relief. This from a government nearly $25 trillion in debt and projected to spend $1.1 trillion more than it was going to collect in taxes even before the COVID-19 pandemic hit the U.S…By the end of the year, the Fed is projected to have purchased $3.5 trillion in government securities with these newly created dollars, one of many tools it is using to help prop up the ailing economy during the COVID-19 pandemic, according to Oxford Economics.” - Jim Sergent, Ledyard King, and Michael Collins/ USA Today May 8, 2020
“The politics of deficit reduction will be toxic. The pandemic will increase calls for lavish spending, not belt-tightening, especially on medical services. Ageing populations mean that there will be surging demand for pension and health spending in the 2030s and 2040s.” - Hugo Dixon/Reuters April 20, 2020
“Net interest payments on the debt are estimated to total $393.5 billion this fiscal year, or 8.7% of all federal outlays.” - Drew DeSilver/Pew Research July 24, 2019
Ok, let’s get this straight: US debt has skyrocketed and interest payments on the debt will crowd out other federal expenditures, all the while the US tax base becomes increasingly shaky and federal outlays on medical services will continue growing for the foreseeable future. It’s all too much, but I’m going to try to fix the situation, starting with the US healthcare system.
The challenge: cut healthcare expenses while expanding coverage and maintaining quality. This actually is doable. Consider that at least 20% of US healthcare spending is unnecessary due to:
Overuse of Medications (e.g., antibiotics)
Overuse of Screening Tests (e.g., colonoscopies)
Overuse of Diagnostic Tests (e.g., endoscopies)
Overuse of Therapeutic Procedures (e.g., cardiovascular, knee replacements)
Overuse of Aggressive Care for Dying Patients
Failures of Care Coordination
Administrative Complexity
Fee-for-Service Incentives
Defensive Medicine
Overuse of Specialists (insufficient gatekeeping)
Underuse of Primary Care Nurse Practitioners
Plus an estimated 10% of Medicare/Medicaid is lost to fraud, a much higher rate than what’s found with private insurers. Why so much fraud? Partly because the Medicare billing system is easy to game (see, for instance, “upcoding” and “inflated risk scores”) and partly because Medicare doesn’t require preauthorization as a condition of payment for medical services and items.
Per a bunch of previous posts, I identified several reforms that could cut US healthcare spending by almost a trillion dollars a year. Suggestions included:
Stay with a multi-payer system, but with strict cost controls, like Japan and Germany.
Develop fee schedules for diagnostic procedures, treatment, and medical equipment, set by federal or regional governments, like Japan and Canada. Public and private payers would use the same fees schedule, streamlining the medical billing process (i.e., reducing administrative complexity)
Increase Medicare/Medicaid fraud prevention, detection, and prosecution.
Greatly expand the number of nurse practitioners as independent primary care providers and gatekeepers to specialists, as is already happening in several European countries.
Institute a no-fault medical malpractice system, like the one in Denmark.
Develop federal guidelines for medical testing and treatment, much like the NICE system in Britain, which would reduce defensive medicine as well as malpractice claims. As in Britain, medical providers would still be allowed to depart from guidance per their independent judgment of what’s best for the patient.
Think about it: around 10% of non-elderly Americans are uninsured. That’s almost 28 million people. But US healthcare costs would be at least 20% lower if the above reforms were implemented. Then the US would have a healthcare system where everyone is covered and everyone’s paying less. And businesses would spend less on employee benefits* and more on wages.
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* Another possible reform would be to cap employer-paid healthcare spending, e.g. “Cadillac plans”.
Links and References:
National Health Expenditure Projections 2017-2026 - CMS
Berwick DM, Hackbarth AD. Eliminating waste in US health care. JAMA. 2012; 307 (14):1513–1516. DOI: 10.1001/jama.2012.362
Brownlee, S., Chalkidou, K., Doust, J., Elshaug, A. G., Glasziou, P., Heath, I., Nagpal, S., Saini, V., Srivastava, D., Chalmers, K., … Korenstein, D. (2017). Evidence for overuse of medical services around the world. Lancet (London, England), 390(10090), 156-168. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5708862/