ECONOMIC SCENE: Why does healthcare reform founder?
Cutting costs would mean trimming pay for too many professionals.
President Obama discusses healthcare at a June meeting with Senate Democrats at the White House. Many health economists doubt that the president will be able to reform the health care system this year.
Reuters/Kevin Lamarque
President Obama has taken on a perilous project in attempting healthcare reform.
The reason: Substantially reducing healthcare costs means cutting the incomes and profits of physicians, nurses, health insurance firms, hospitals, and others.
“Everybody has to take a haircut,” says Jean Mitchell, a health economist at Georgetown University.
That’s why she and some other top American healthcare economists doubt Mr. Obama will really reform the system this year.
Proposals to cut healthcare costs boil down to “talking about people’s salaries,” says Henry Aaron of the Washington-based Brookings Institution, who recently bet Washington Post columnist E.J. Dionne that no large-scale healthcare reform would pass this year.
The industry already is the biggest in the nation. It employs more than 14 million people, many well paid. Its lobbyists have serious clout.
So when reforms are proposed, those affected go to Congress to block change. If the future follows the pattern of the past, they will succeed again in preventing serious cost reductions.
Over the longer run, the rising cost of healthcare is unsustainable. Businesses and individuals won’t be able to pay the bills.
The government estimates healthcare spending this year will reach $2.55 trillion, or 16.9 percent of the gross domestic product (GDP), the nation’s total output of goods and services. That’s $8,839 per person.
Without restraint, costs will rise by about 6.7 percent a year to reach $4.2 trillion by 2017, or 19.5 percent of GDP, projects the Centers for Medicare and Medicaid Services.
Those rising costs will push the government-run Medicare system into the red by 2017, trustees of the program projected last month.
