The Tribune Democrat, Johnstown, PA

February 10, 2013

William Lloyd | Controlling health care costs essential to deficit reduction

William Lloyd

— Health care costs have been growing faster than the U.S. economy for decades. The Kaiser Family Foundation reports that, taken together, government and private spending on health care was just over

5 percent of the nation’s economy in 1960, but is about 18 percent today and will be about 20 percent by 2020. 

According to the Congressional Budget Office, health care spending by the federal government alone was about 5.6 percent of the economy in 2011 and could reach 9.4 percent by 2035.

The aging of the baby boomers is one obvious reason for the trend in health care spending. In addition, technological advances continuously make procedures and drugs available that most of us could not have imagined in 1960.

The easiest way to reduce the impact of health care on the federal budget would be to cap how much the government pays and simply shift a bigger percentage of the costs to the consumer.

That is essentially the approach advocated by the Republicans during the 2012 campaign. At the same time, Republicans warned voters that Obamacare will allow government bureaucrats to ration health care.

Ironically, rationing is exactly what would happen under the Republican deficit reduction plan. Some consumers would be able to cut spending on other things in order to pay more for health care, but many others would have to forego treatments we now take for granted.

An alternative to the Republican plan is to attack the 30 percent of U.S. health care spending that the Institute of Medicine believes is unnecessary.

Obamacare opted for that alternative, with a strategy of emphasizing preventive care, paying health care providers on the basis of results rather than on the basis of procedures performed, and improving coordination among providers.

In theory, these efforts offer the opportunity to control costs without sacrificing quality of care or rationing that care on the basis of household income.

Unfortunately, it is uncertain how well this approach will work. For example, paying doctors less may create a shortage of physicians willing to take Medicare patients.

Controlling health care costs is critical to whether Obamacare shrinks the federal deficit or increases it. For example, to ease the impact of mandating that all citizens have health insurance, Obamacare will provide subsidies to help pay the premiums for families and individuals with modest incomes.

Unfortunately, if Obamacare’s cost-control strategy does not work, premiums will become unaffordable for many households unless federal subsidies go up, thereby increasing the deficit.

At the same time, many employers may stop insuring their workers and choose the cheaper option of paying a fine; if that happens, even more workers will qualify for subsidies, thereby further increasing the deficit.

Regardless of what is decided in Washington, it is likely we all will need to help control health care costs.

According to the Centers for Disease Control and Prevention, chronic illness is responsible for 75 percent of health care spending in the United States.

We could avoid, or mitigate, many chronic illnesses if we were willing to make lifestyle changes. For example, the American Lung Association estimates that only about half as many adults smoke today as did in 1965, but smoking continues to be the primary cause of preventable death.

Furthermore, according to the Centers for Disease Control and Prevention, only 13 percent of U.S. adults were obese in 1960, but the rate had climbed to 34 percent by 2008. As a result, obesity has now become a major cause of chronic illness.

Even if we are not obese, most of us would benefit by losing weight and improving our eating habits. Not only would our health be better, but health care costs would stabilize and the federal deficit would decline. 

Although losing weight is easier said than done, most Americans do not want government to restrict the size of sugary drinks sold in eating establishments, ban the sale of junk food in schools or require school cafeterias and restaurants to offer more nutritional menus.

Many Americans also react with skepticism to suggestions that we reduce our utilization of health care. For example, consumers objected to managed care in the 1990s because of fear that insurance companies would decide that desired treatments were unnecessary.

More recently, recommendations by the U.S. Preventive Services Task Force for less frequent mammograms and prostate cancer screening met significant resistance from the public.

Most of us say we want deficit reduction. The question is whether we are willing to do our part.

William Lloyd of Somerset represented Somerset County in the state House of Representatives (1981-1998) and served as the state’s small business advocate (November 2003-October 2011). He writes a monthly column for The Tribune-Democrat.

Click here to subscribe to The Tribune-Democrat print edition.

Click here to subscribe to The Tribune-Democrat e-edition.