Econ critique
47290v3o0
health_care_in_america_dooley.pdf
The Future of Health Care in America
Mitchell Dooley Econ 322: Economics Seminar
Dr. McCain 04.29.2016
The Issues
Health care in America is currently a hot button issue. Its future, and the
government’s role in it, is dividing individuals on and against party lines. Numerous plans
have been proposed to change the future of health are in America, but one thing is certain.
The current path has not been effective and must be modified to ensure that all Americans
receive high quality health care in a timely fashion. Specifically, the U.S. has issues with
providing a health care product that is accessible to people regardless of their place in our
country’s demographics. America is capable of, and in some instances is, providing high
quality health care. But, it is not always delivered in a time or cost efficient manner. And,
when compared to other developed nations, we have some ground to make up.
There are a number of issues with the current health care system in America. The
U.S. system is unique in that it has both great and poor qualities. The Commonwealth Fund
is a private organization that funds independent research with the goal of identifying which
health care systems provide the best quality care to their patients at the most efficient
costs. A study that they completed in 2014 compared the health care models of 11
developed countries with the goal of creating a system that ranks these countries on the
effectiveness of their policy choices.
*(The Commonwealth Fund, 2014)
The U.S. ranked last in an aggregate of the scores. Specifically, the U.S. also received poor
ratings in the access that is provided to health care as well as the efficiency, equity, and
health or quality of life categories. Conversely, it did perform relatively well in the quality
and effectiveness of the care that it provided. In this study, efficiency refers to the time and
money spent navigating the health system. For example, the U.S. received poor marks here
because there were repeat instances in which, due to some human error, duplicate testing
would be ordered for a patient. This was also affected by patients’ over reliance on the
emergency room and the poor or often nonexistent communication between healthcare
providers as wells as insurance agencies. Equity measures the overall health level that a
population lives at. The U.S. did poorly here because of individuals who have chosen to live
with their health issues rather than have them diagnosed or receive treatment. The main
drivers behind these choices are the still too high costs and wait times associated with
specialist and emergency room visits in the U.S. system. Specifically, roughly 40% of adults
who receive a below average income reported that they have chosen to live with a health
condition rather than deal with the above-‐mentioned issues. Comparably, less than 10% of
adults with similar conditions made the same choice in Sweden, Norway, Canada, and the
U.K. To sum this up, the U.S. ranks dead last in every measure of cost-‐related access. This
is an issue that speaks, not to the quality of the medicine that we can offer, but to whom we
deem worthy of receiving it.
The quality of the care that is offered in the U.S. has received mixed feedback as well.
On the negative side, we deliver an incredibly high infant mortality rate. The CIA
categorized an infant death as any death that occurs before a child reaches one year old. In
the ranking of nations that they observed, Afghanistan ranked the worst with 115.08 infant
deaths per 1,000 live births. In this list, the U.S. ranks 167th. In this case, a higher ranking
is better. At number 167 and 5.87 deaths per 1,000 live births, the U.S. is one spot better
than Serbia and slightly worse than Croatia. Meanwhile, France is 213th with 3.28 deaths,
the U.K. is 187th with 4.38, Australia is 188th with 4.37, and Singapore is 221st with 2.48.
This is a poor outcome for the U.S. and is an area that we can markedly improve in (Central
Intelligence Agency, 2015). This is not a new issue as the CDC reported similar findings in
2010 when it placed the U.S. behind 25 other developed nations in terms of infant death
rates (MacDorman, et. al., 2010, 1-‐6). Meanwhile, the U.S. ranks in the top 10 in the world
by proportion for women still alive five years after being diagnosed with breast cancer. As
of 2012, there are 970, 693 women in the U.S. who are still alive five years post breast
cancer diagnosis. This requires a high quality diagnosis process and culture as well as an
effective treatment system following diagnosis.
Furthermore, in addition to being more expensive than other developed nations,
health care costs in America are far from transparent. Specifically, health spending in this
country is higher in both average dollars per capita and in purchasing-‐power dollars per
capita measures. This distinction represents a real price disparity between America and
other developed nations. Interestingly enough, this greater price point is accompanied by a
lower usage rate of health services in America than in other developed nations. Below are
two charts from the International Federation of Health Plans that help illustrate this point.
The two graphs compare costs for a common procedure and a popular medication for high
cholesterol, an ailment that affects 32% of American adults (Center for Disease Control and
Prevention, 2015). In both instances, costs in the U.S. more than double the closest
country. Also noteworthy is the range of costs in the U.S. In the majority of industrialized
nations, health care prices are either set by the government or they are set by negotiations
between large associations of health care providers and insurers. Conversely, prices are
set here in the U.S. by negotiations between individual insurers and individual health
providers. Health providers include private practices, hospitals, and drug companies. This
method results in a low bargaining power for the small, fragmented insurers leading to the
large disparity in prices that is visible on the graphs. Furthermore, a lack of transparency
makes it difficult to determine where in the range a specific provider falls until a patient
receives a bill. This situation favors large insurers and health provider administrations. It
hurts the patients who have minimal bargaining power in this situation and who may not
even know what they will be paying until after a transaction has taken place.
The high cost of health care in America has affected more than the low income
demographic. Annually, the U.S. spends the equivalent of 17% of its GDP on health care.
Meanwhile, the average for developed nations is 9%. And France, another high spender, on
only allocates 12% (The Economist Newspaper Ltd., 2015). It is issues like this that lend
the Obama administration to pass the Affordable Care Act.
The ACA
The Affordable Care Act was introduced in October of 2009, signed into law in
March of 2010 and had the first enrollment period starting in October of 2013. Its effects
have been covered by a great number of reputable sources. This paper will pull from some
of them but will rely on the work of Amanda E. Kowalski, an economist at Yale University.
In her study, Ms. Kowalski used a series of regression analyses to compare the pre-‐ and
post-‐reform health insurance markets. Specifically, she observed the number of individuals
with coverage before and after the ACA, health insurance premiums before and after, and
the average costs to insurers before and after.
To begin, she noted a significant increase in coverage as a result of the ACA.
Specifically, she attributes the insurance of 4.2 million individuals to the use of the
Affordable Care Act. This, at the end of 2014, brought the nations total enrollment to 13.2
million people. This is a 32% increase over the rise in insured individuals that would have
occurred naturally without the ACA. This is a more than significant increase. The
Economist supported this increase in reporting that 16.2% of Americans lacked coverage in
2009 while only 12.3% lacked coverage by 2015. They also found evidence that the ACA
decreased the cost of health care to the government. Annual spending per Medicare
patient was $12,000 in 2011. By 2014, it was $11,2008, an almost 7% decrease per patient
(The Economist, 2015).
Initially, the ACA led to a rise in premium costs in a majority of states. Historically,
premiums are volatile and more likely to rise than to fall. Kowalski reports that Forbes
predicted a 49% increase in individual health insurance premiums. She also states that her
model returned a value lower than Forbes did.
In her study, Kowalski examined the average cost to insurer on a state-‐by-‐state
basis. She observed an inverse trend between the premium rate and the cost to insurers.
The link may or may not be casual but there is a correlation. State to state, there was little
constancy in the change to the average cost. Overall, the nation experienced a 32%
increase in costs linked to the ACA. These markups could potentially eliminate the welfare
gains from increased coverage, but more time will be needed to measure the exact benefits
of the additional coverage. In the majority of states, the pre-‐reform market was adversely
selected. As a result, the ACA led to more low cost individuals obtaining coverage. This is a
positive indicator for the long-‐term costs of health care in the U.S (Kowalski, 2014).
Sources
(2014), “US Health System Ranks Last Among Eleven Countries on Measures of Access,
Equity, Quality, Efficiency, and Healthy Lives” (The Commonwealth Fund), available
at http://www.commonwealthfund.org/publications/press-‐releases/2014/jun/us-‐
health-‐system-‐ranks-‐last, as of April 20, 2016
Uwe E, Reinhardt (2013), “U.S. Health Care Prices Are the Elephant in the Room” (The New
York Times Commission), available at
http://economix.blogs.nytimes.com/2013/03/29/u-‐s-‐health-‐care-‐prices-‐are-‐the-‐
elephant-‐in-‐the-‐room/, as of April 20, 2016
(2015), “High Cholesterol Facts” (Centers for Disease Control and Prevention), available at
http://www.cdc.gov/cholesterol/facts.htm as of April 28, 2016
(2015), “Don’t kill Obamacare: As the Supreme Court considers whether to gut Obamacare,
evidence is mounting that the law is working” (The Economist Newspaper Ltd.),
available at http://www.economist.com/news/leaders/21645730-‐supreme-‐court-‐
considers-‐whether-‐gut-‐obamacare-‐evidence-‐mounting-‐law, as of April 20, 2016
(2015), “The World Factbook” (Central Intelligence Agency), available at
https://www.cia.gov/library/publications/the-‐world-‐
factbook/rankorder/2091rank.html, as of April 28, 2016
MacDorman, M.F., Mathews, T.J., Mohangoo, A. D., Zeitlan, J. (2010), “International
Comparisons of Infant Mortality and Related Factors: United States and Europe,
2010,” National Vital Statistics Reports, 63, 5, 1-‐6
Kowalski, A. E., (2014), “The Early Impact of the Affordable Care Act State-‐By-‐State,”
Brookings Papers on Economic Activity
