NCPA - National Center for Policy Analysis


January 5, 2009

As Michael Leavitt ends four years as Secretary of Health and Human services, he offers this attention-arresting arithmetic: Absent fundamental reforms, over the next two decades the average American household's health care spending, including the portion of its taxes that pays for Medicare and Medicaid, will go from 23 percent to 41 percent of average household income.  Consider:

  • When Medicare was created in 1965, the median age of Americans was 28.4 years; now it is 36.6.
  • The elderly are more numerous and medicine is more broadly competent than was then anticipated.
  • Leavitt says that Medicare's "big three" hospital procedure expenses today are hip and knee replacements and cardiovascular operations with stents, which were not on medicine's menu in 1965.
  • And the number of seniors living long enough to have five or more chronic conditions -- 23 percent of Medicare beneficiaries -- has increased. Many of those conditions could be prevented or managed by better decisions about eating, exercising and smoking.

Medicare is a price-fixing system for upward of 12,000 procedures and drug codes -- and for hundreds of categories of equipment, the providers of which tenaciously oppose competition.

Leavitt says that until health care recipients of common procedures can get upfront prices they can understand and compare, there will be little accountability or discipline in the system: "In the auto industry, if the steering-wheel maker charges an exorbitant price, the car company finds a more competitive supplier. In health care, if the medical equipment supplier charges an exorbitant price, none of the other medical participants care."

Source: George Will, "If You Think Health Care is Expensive…," Townhall, January 1, 2009.


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