We Need to Cut The Cost of Care

The foundation of our health care system in the United States is dependent upon redistribution of costs: from healthy to sick, from young to old, and from wealthy to poor. However, Americans are divided on the correct levels of this redistribution, especially from wealthy to poor Americans. Despite our division, 92% of Americans agree that we need to make major changes to our health care system. With so many conflicting ideas about what the “ideal” system looks like, from Medicare-for-All to further reducing the current amount of public funding and assistance, it is incredibly difficult to come to a complex, integrated solution that better serves our population. So, where should we start? 

In my opinion, we should not get so caught up in the relative levels of redistribution of health care costs that we fail to pay attention to the total dollar value of care received. In 2015, the cost per capita of health care in the US was $9,393 – this is on average 18.7% of an individual’s income. In the lowest income quintile, average health expenditures were 240.8% of income; for Medicaid beneficiaries, these expenses amounted to 112.6%. With this high of a dollar amount and percentage of income for certain groups, it is difficult to begin discussions about who should pay for whom. Either everyone needs a big raise or we need to reduce the cost of health care. 

Furthermore, it is estimated that the amount of waste in the US health care system falls between $760-935 billion annually. My proposal is that we start making changes to our health care system by addressing unnecessary expenditures. 

With more emphasis on coordination of care, reducing unnecessary tests and procedures, and working to reduce administrative complexities through better-coordinated electronic health records across systems as well as national negotiation for pharmaceutical and insurance rates, I believe we can significantly reduce the average per capita cost of health care in the United States. This would make health care expenditures more affordable for individual Americans, while simultaneously allowing us to redistribute the money saved to currently uninsured people who need care but are not yet receiving it. 

This Health Policy Journal Club review is written by David McDonald as part of our collaboration with the Health Policy Journal Club at Baylor College of Medicine where he is a medical student.

Abstract

Objective: To measure the burden of financing health care costs and quantify redistribution among population groups.

Data sources: A synthetic population using data combined from multiple sources, including the Survey of Income and Program Participation (SIPP), Medical Expenditure Panel Survey (MEPS), Kaiser Family Foundation (KFF)/Health Research Educational Trust (HRET) Employer Health Benefits Survey, American Community Survey (ACS), and National Health Expenditure Accounts (NHEA).

Study design: We estimate two dollar amounts for each individual in the synthetic population: (a) payments to finance health care services, which includes all payments by a household and their employers to finance health care, including premiums, out-of-pocket payments, federal and state taxes, and other payments; and (b) the dollar value of health care services received, which equals the amount paid to providers for those services.

Data extraction methods: We linked the nationally representative survey data using statistical matching. We allocated health care expenditures from the NHEA to individuals and households based on expenditures reported in the MEPS.

Principal findings: We show that higher-income households pay the most to finance health care in dollar amounts, but the burden of payments as a share of income is greater among lower-income households.

Conclusions: Accounting for all sources of payments provides a clear picture of the burden of financing health care costs, and how that burden is spread under our current financing system.

PMID: 31984503

Carman, KG, et al. Health Serv Res. 2020; 55 (2): 224-231.