The Problem With The GOP’s Health Reform Proposals In One Chart

Posted on

"The Problem With The GOP’s Health Reform Proposals In One Chart"

Both Aaron Carroll at The Incidental Economist and David Phillippe at Punditocracy pointed to a new brief from the National Institute for Health Care Management this month, which found that half of all health care spending in 2009 was concentrated amongst just 5 percent of Americans. Conversely, half of all American health care spenders accounted for just 3 percent of spending.

Not surprisingly, this top 5 percent of spenders is disproportionately represented amongst the sick and the elderly. More importantly, an individual in the top 5 percent generally accounted for something in the neighborhood of $40,000 in health care spending in 2009.

That’s significant because most of the health care reforms suggested by Republicans or conservatives include things like health savings accounts, high-deductible catastrophic coverage plans, allowing insurers to compete across state lines, and the like. These approaches focus on controlling cost by increasing individuals’ price sensitivity to their health care decisions. But for people who must spend $40,000 or more in a single year, “price sensitivity” is largely meaningless — there’s no way for them to grapple with such costs themselves, unless they’re wealthy. When those same people account for half of all health care spending, the possibility of controlling health care costs via the consumer-driven model begin to decrease rapidly. As Carroll sums up:

When we talk about consumer directed health care, we’re talking mostly about healthy people. We don’t want sick people to avoid care. We want to stop healthy people from consuming it. The problem is that healthy people consume so little care to begin with. If we could incentivize the healthier half of people to forego all their personal health care spending, we’d spend $36 billion less out of a total $1.259 trillion in personal health care spending. That would be a drop in the bucket.

Health savings accounts are of little use to anyone amongst the higher spending groups who isn’t independently wealthy, as they will quickly deplete their savings or won’t be able to stock the account in the first place. Competition across state lines will allow insurers to congregate in the state with the most lax regulations and requirements, and thus compete to see who can do the best job of denying coverage to high-risk individuals, rather than competing to see who can deliver the most efficient and effective care. Catastrophic coverage plans tend to divide the pool of young and healthy coverage recipients from the old and sick, leaving the pool of the latter with less incoming funds to deal with greater costs.

Increasing price sensitivity means individualizing risk, by leaving more of the cost of an individual’s care on their own shoulders. Absent a single-payer system, or something along the lines of Obamacare’s framework, it’s hard to see a possible route to controlling costs that doesn’t involve simply pricing large numbers of sick and elderly Americans out of receiving health care entirely. In fact, that’s precisely what the American system has already been doing for some time.

« »

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.