How Health Care Can Save or Sink America
The Case for Reform and Fiscal Sustainability
Article Summary and Author Biography
The United States' fiscal future depends on whether the country can limit health-care costs. Obama's reforms were a major step in the right direction, argues the former White House budget director. But to finish the job, the U.S. medical system must evolve so that it emphasizes evidence and pursues quality rather than quantity.
PETER R. ORSZAG is Vice Chair of Global Banking at Citigroup, an Adjunct Senior Fellow at the Council on Foreign Relations, and a columnist for Bloomberg. He was Director of the White House's Office of Management and Budget in 2009-10 and Director of the Congressional Budget Office in 2007-8.
Video
A Foreign Affairs discussion on health care.
News & Events
The editor of Foreign Affairs talks with the former director of the White House's Office of Management and Budget and a NYU Law Professor about the Supreme Court's decision on the Affordable Care Act.
Essay
Pundits predicted that the U.S. Supreme Court’s ruling on the Affordable Care Act would make history. In fact, by upholding the individual mandate as a tax, the justices took themselves largely out of the picture, ensuring that the debate over health care will play out in the political sphere, where it belongs.
Rising health-care costs are at the core of the United States' long-term fiscal imbalance. The Congressional Budget Office (CBO) projects that between now and 2050, Medicare, Medicaid, and other federal spending on health care will rise from 5.5 percent of GDP to more than 12 percent. (Social Security costs, by comparison, are projected to increase from five percent of GDP to six percent over the same period.) It is no exaggeration to say that the United States' standing in the world depends on its success in constraining this health-care cost explosion; unless it does, the country will eventually face a severe fiscal crisis or a crippling inability to invest in other areas.
The problem is not limited to the federal government. Over the past 25 years, cost increases in the national Medicare and Medicaid programs have roughly paralleled (and actually been slightly below) cost increases in the rest of the health-care system. These trends drive a wide range of problems. State governments have had to divert funds from education to health care, which is partly why salaries for professors at public universities are now often 15 to 20 percent lower than those at comparable private universities. Meanwhile, the rising cost of employer-sponsored health insurance has squeezed take-home pay for most U.S. workers at the same time as median wages have stagnated and income inequality has increased.
Another dimension of the problem involves the variation of health-care costs across the United States. A recent analysis by the Medicare Payment Advisory Commission found that spending in higher-cost areas of the United States (that is, those in the 90th percentile ranked by cost), even after controlling for various factors, was 30 percent higher than in lower-cost areas (those in the 10th percentile). This substantial variation is undesirable both because the high-cost areas unnecessarily drive up total costs and because the results are often haphazard for patients. Indeed, higher costs typically do not equal better care -- and sometimes they mean the opposite.
Read more at at Foreign Affairs' Special Report: Global Public Health.
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