Healthcare again grabs political attention

Layoffs add to ranks of uninsured as hospitals face inflation, cuts in Medicare.

During the late 1980s and early 1990s, Washington was much troubled by the "health-care-cost crisis." Medical costs were rising at double-digit annual rates in the United States.

The problem is back - and so is its political currency as an election-year issue.

It's "a perfect storm," says Dr. Richard Corlin, president of the American Medical Association. This is a "very serious issue."

The storm is multifaceted: Washington is trying to hold Medicare payments in check - imposing a 5.4 percent cut in payments to physicians this year - even as medical prices generally are rising at three times the overall US inflation rate. At the same time, the recession means hundreds of thousands of people are losing health insurance along with their jobs.

Rising costs complicate the ambition of many politicians to please voters with expanded government-financed health services.

In his State of the Union address last week, President Bush urged Congress to launch coverage for prescription drugs for seniors within the Medicare system, to approve more veterans' healthcare spending, and to provide uninsured workers credits to help buy health coverage.

There's no doubt Congress will devote much talk and effort to health bills. Issues like prescription-drug coverage, which were significant in the 2000 election, are likely to be high priorities with many voters.

"But nothing will happen," says Henry Aaron, an economist at the Brookings Institution, a Washington think tank. "Doing anything costs money, and there isn't any. The budget surplus has gone a-glimmering."

Further, when it comes to program details and philosophies, Republicans and Democrats are often divided. In looking at new health measures, the two parties have found agreement elusive.

Many states are trying to enact their own reforms. In California, for example, Gov. Gray Davis (D) recently called for minimum nurse staffing levels, aiming to ensure better hospital care.

Why costs soar again

On the cost front, several factors have conspired to create rapid inflation.

These include an aging population, advancing but expensive medical technology, new costly pharmaceutical products, and increased medical overhead costs, including malpractice insurance.

Leighton Ku, a senior fellow at the Center on Budget and Policy Priorities in Washington, sees another factor in rising health costs: rising demand. Many Americans became more prosperous in the 1990s. They have the means and desire to spend more on traditional or alternative healthcare.

Last year, growing health expenditures were an important factor in preventing the recession from deepening, he notes.

The latest government statistics show that total US health spending in 2000 climbed 6.9 percent to $1.29 trillion, after a 5.7 percent rise in 1999.

On a per person basis, expenditures on healthcare rose to $4,637, up from $2,966 in 1991.

Last year, costs likely rose even faster. Private health-insurance premiums jumped 11 percent, versus 8 percent in 2000.

During much of the 1990s, health expenditures were restrained successfully as government and private employers (through Health Maintenance Organizations) sought to limit payments for specific services. Many employers have asked workers to shoulder a higher proportion of their healthcare costs.

But it is widely charged that the brakes have been put on too hard, and that patients aren't getting adequate care in many cases.

At the same time, physicians maintain that they are inadequately compensated. In 1999, the median income of American physicians - half paid more, half paid less - was $160,000. The AMA is fighting to get Congress to reverse the cut in Medicare payments that went into effect Jan. 1. Some physicians are refusing to take new Medicare patients.

US system unique

By international standards, the US health system is expensive. It accounts for 13.2 percent of gross domestic product, versus 9.5 percent in Canada and 6.7 percent in Britain.

"We have a completely different [health] system," explains Dr. Corlin. The US has "greater availability of service." There are not waiting lists for surgery. Tort costs are less in other nations.

Most other industrial nations have practically universal health-insurance coverage. By contrast, 14 percent of Americans are not covered.

President Bush's budget asks Congress for $89 billion over 10 years to help low-income Americans become insured.

The swelling ranks of the uninsured among laid-off workers is a subject of intense dispute in Congress. Late last year, it ended talk of a compromise on a stimulus package for the economy.

Republicans wanted to give the newly uninsured tax credits to help them pay for insurance coverage. Democrats advocated subsidies for the newly unemployed to continue their employer-provided insurance or to make them eligible for the Medicaid program.

In the case of overhauling Medicare to provide prescription-drug benefits to the elderly, Bush proposes starting with coverage for 3 million low-income elderly at a 10-year cost of $190 billion.

By focusing on beneficiaries with annual incomes of $11,610 to $17,415 for a two-member family - not all seniors - the Bush proposal keeps costs down.

But many Republican and Democratic legislators say at least $300 billion is needed.

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