Why the healthcare crisis won't go away

The United States faces a medical emergency. Costs of the nation's healthcare system are growing so fast they are out of control. Many employers are dumping escalating healthcare expenses for both employees and their retired workers as fast as they can manage, fearing a loss of competitiveness.

So far, the White House and other would-be physicians have decided that the answer is more of the same - the magic of consumer choice in a free market. But some are skeptical that this will provide a real cure.

"The whole idea is unsound," says Arnold Relman, a Harvard Medical School expert. Yet influential people in Washington have persuaded themselves that a more competitive healthcare system will slash costs enough to keep it workable.

The numbers seem to back up Dr. Relman's conclusion.

Currently, the average American consumes $6,420 worth of healthcare services a year. That's more than $12,200 a year for the average family. It's the most inefficient medical system among industrial nations.

US healthcare costs have reached $1.6 trillion a year. That's 15 percent of the nation's economy, up from 5 percent in 1963. Other industrial nations devote less than 10 percent of gross domestic product to healthcare.

The US pays more than twice as much per person as other wealthy countries. "Yet it has little if anything to show in terms of outcomes," notes Dean Baker, an economist with the Center for Economic and Policy Research, in a new study.

Moreover, costs are rising at a rate of 7 to 9 percent a year. That's not sustainable, notes Relman. "We are not getting anywhere near our money's worth."

US life expectancies are shorter, infant mortality rates higher, and other health measures are worse than in nearly all other wealthy nations.

Approximately 45 million Americans lack health insurance all year; about 80 million go without it for part of the year.

In the long run, such a consumer-driven medical system is not likely to be politically viable. It may take five to 10 years, but at some point the tide of political and public opinion will turn. Then the US will need to debate and consider implementing a changed system, probably a form of a "single-payer" system that would be less expensive and provide quality healthcare.

"Something will happen at some point because we can't afford [today's system]," says Mr. Baker. "But everyone is trying to do their best to will it away. Politicians are scared to death to talk about this. You can't even get a serious discussion."

Rep. Dennis Kucinich of Ohio proposed a universal healthcare plan in his unsuccessful bid for the Democratic presidential nomination. It got little attention. The single-payer system would have saved $286 billion a year on paperwork alone, his experts held.

The root of the problem, Relman holds, is that medical care is not really a "market" in the classical economic sense. Health problems are often complex. Patients rely on professional expertise rather than their own consumer judgment. So trying to treat healthcare as a conventional market is bound to fail.

Nevertheless, medical care has taken on the trappings of the market over the past four decades, Relman argues. Instead of a system of mostly personal transactions between physicians and patients that took place in in patients' homes, doctors' offices, and not-for-profit hospitals and clinics, it has now become a "new medical- industrial complex," he writes in a March issue of New Republic. He sees this industrial transformation undermining the professional values of physicians, "which are surely an essential ingredient of any decent medical care system.... Financial incentives were replacing the service ethic of doctors and hospitals as the providers of care began to compete for market share and larger income."

Many conservative business and health-policy experts continue holding unshakable faith in a market solution to rising costs. That view emerged in the creation of tax-deductible "health savings accounts" in the 2003 bill providing prescription-drug coverage to seniors next year. The idea is that medical ads should be encouraged to help consumers evaluate medical goods and services and thus use their account funds more wisely.

But costs are still going up. Drug inflation is so high, seniors will pay more for drugs next year on average than they did in 2000, even after they get the new government subsidy.

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