The health care system in the United States is a complex profit driven system. Proposed legislation of the Patient Protection and Affordable Care Act will cover a higher percentage of the population and presumably improve the overall health status of the nation. The extraction of astronomical financial profit from the health sector is the largest hindrance to universal coverage in the nation. Private sector involvement drives up cost without improving the quality of medical care. I am of the belief that universal coverage would be the most efficient and least costly mechanism to improving the health of the nations citizens.
The United States is the only industrialized nation that does not guarantee citizens the right of basic health insurance. In fiscal year 2005 the nation spent 1.89 trillion dollars on health expenditures, this figure has grown by 13%, to 2.145 billion dollars for 2010. Health care coverage and delivery in the United States is a complex and costly system; as a nation we devote over 15% of our GDP to health care, and we do not cover the entire population. Nearly 50 million Americans are currently living without health insurance. The costly system of our nation levers profit margin against health.
The current system of health care delivery in the United States is paid for through the private sector, this opposes the system of public financing that is the norm in other OECD nations. Passing the Patient Protection and Affordable Care Act will be a great asset to the health of the United States. From my point of view one of the largest benefits of this legislation is the extension of Medicaid. Providing coverage for citizens who are in the lower economic tiers will result in a long term cost savings. According to a report issued by the Kaiser Family Foundation uncompensated cost of care provided to the uninsured was $57 billion in 2008, 75% of this burden was covered by federal, state, and local funds (KFF p14). The governmental expenditure of $42.9 billion dollars is a sum that could provide coverage for 8.58 million people.
The United States spend a sum of money on health care that far exceeding the reasonable cost of providing coverage. Universal coverage of all citizens of the United States would be less costly than the current third party system, largely due to a reduction in administrative costs. The administrative cost of the current system is reported to be 25% (RWJF), this burden of cost would be drastically reduced by universal coverage. If the administrative cost for health care could be lowered to the 2% level that is reported by Medicare (RWJF), the nation would save close to $1500 per covered individual. The Robert Wood Johnson Foundation determines the “mean Medicare expenditure per capita in 1996 was $4,993 (RWJF p6). The current per capita expenditure for health care is $6401.
There is no reason that the circulating capital in the current health care budget is inadequate to provide universal coverage, while allowing existing companies to profit. Given the current budget of $2.145 trillion for 2011, reducing the per capita expenditure to $5000 would allow coverage of the entire population, and provide a profit of $610 billion.
A hindrance to efficiency of the current health care delivery system in the United States comes from a high administrative cost, high intensity of hospital services, and high cost of drugs. The third party system allows extraction of profit in a manner that is not proportionate to the growth rate of the population or the GDP. At the same time pharmaceutical companies register profits that approach 20% of revenues; the profit of all Fortune 500 companies is 5% of revenue (Bodenheimer p201). The excess profit that is donated to the pharmaceutical industry could be used to provide coverage for the uninsured. The Affordable Care Act will “Impose new annual fees on the pharmaceutical manufacturing sector, according to the following schedule: $2.8 billion in 2012-2013; $3.0 billion in 2014-2016; $4.0 billion in 2017; $4.1 billion in 2018; and $2.8 billion in 2019 and later (ACA Summary p4).” This re-distributive measure will reduce the exponential profit extracted from the health care economy by the pharmaceutical industry.
Compared to other developed nations, the United States pays a disproportionate amount of Gross Domestic Product to the health care sector. Nations with stronger economies typically spend a higher percentage of GDP on health care (Bodenheimer). The cost of health care in the United States is inflated by the third party system, the insurance industry. Ideology is likely the primary obstacle to providing universal health care coverage in the United States. Citizens of the nation are traditionally fearful of taxes, and any politician that promises to raise taxes, is likely committing political suicide. The taxes on the average worker in the United States are 30%, adding the per capita expenditure on health care would bring the tax rate up to roughly 44.87%. (OECD Statistics). Privatization of health care in the United States is a deceptive means of concealing the cost.
The Affordable Care Act will construct Exchanges, a type of free market system that will lower the burden of individuals who wish to purchase insurance. The Exchanges will provide the customer with the cost benefit of group insurance rates, without tying the insurance to specific employment. This will increase the long term stability and health for workers by severing the link between employment and insurance, enabling consistent coverage as workers change jobs.
Universal coverage would result in improved health status for citizens of the United States, at a cost equal to or below the current expenditure. Coverage would result in a lower per visit fees as reliance on emergency rooms is reduced. The front end expenditure for coverage is likely to result in a less costly overall system. The high cost of the contemporary health care system in the United States is resultant of high administrative costs, high intensity of hospitalization services, and high cost of drugs (Bodenheimer).
Providing universal coverage will lower the administrative burden through elimination of billing and unnecessary paper work. The intensity of hospital utilization will be reduced through increase exposure to primary care. The provisions of the Patient Protection and Affordable Care Act move the nation closer to covering the segment of the population that is currently uninsured. I commend the efforts of legislators in drafting this bill, though I believe that a single payer system, providing universal coverage, would be less costly in the long run. In an ideal world ideology would be removed from politics and laws would be drafted to guarantee rights rather than profit.
Note: This blog post will be used as an outline for a longer paper.
Bodenheimer, Thomas, and Kevin Grumbach. Understanding Health Policy: a Clinical Approach. New York: McGraw-Hill Medical, 2009. Print.