Reforming Health Care In America

R E F O R M I N G

H E A L T H

C A R E

I N

A M E R I C A

HEALTH CARE IN AMERICA IS EXPENSIVE National health-care expenses are projected to increase 5.5 percent to $2,500 billion in 2009, after rising 6.1 percent in 2008.1 As a percentage of GDP, health casts 17.6% today. This is projected to rise to 20.0% by 2017 (CBO estimate). Other industrialized, capitalistic democracies with universal health care spend between 6% and 10% of annual GDP with equal or better health outcomes than the U.S. The present system has many positive feedback loops that reinforce costs escalating at an annualized rate greater than GDP growth. These positive feedback loops cost $650 billion a year more than a comparable single payer health system of other industrialized economies, while delivering substandard results. 2 STRUCTURAL CHANGES FOR REDUCING COSTS OF HEALTHCARE There is no silver bullet or panacea to slow growth in national expenditures for health care. Even making single payer health care available to all citizens, similar to what the U.S. military, federal and state government employees, Congress, and Medicare participants presently receive is not a panacea. To rein in the escalating costs of national health care, a number of system restructuring actions is required. To achieve real cost reduction may require 5-7 years or more. A few of the steps required to reduce as a percentage of GDP and to slow future growth in national health care costs include the following: Provide preventive and primary universal medical care for all citizens. Regardless of preexisting conditions, existing health insurance coverage, or current employment. Unisureds tend to put off care until they require emergency room care. Universal coverage also reduces opportunity costs of pandemics, should one occur in the future. 3 Potentially worth 9% in net annual cost savings. Develop a single national system for billing & settlement. 4 All hospitals, insurers, physicians, pharmacists, and other health care providers would be required to use a single billing and settlement system. In return for using this system that uses standardized billing codes, settlement would occur within 24 hours of bill1

Projection from Centers for Medicare and Medicaid Services.

A single nonprofit payer health care system could save more than $650 billion per year. See “Why Americans pay more for health care,” McKinsey Quarterly (December 2008). 2

Some candidates include: HIV/AIDS, hantavirus pulmonary syndrome, SARS, H5N1 avian influenza virus, dengue fever, West Nile virus, etc. The Center for Disease Control (CDC) estimates the cost of a pandemic to the national economy at $71.3 billion to $166.5 billion. The total economic impact, including the cost of disruptions to commerce, might exceed $200 billion. 3

4

LYLE A. BRECHT

System would be run as a federally-charted utility http://www.pdfcoke.com/doc/12383910/.

DRAFT 2.1 410.963.8680 - C A P I T A L M A R K E T S R E S E A R C H - Friday, October 9, 2009

Page 1 of 2

R E F O R M I N G

H E A L T H

C A R E

I N

A M E R I C A

ing. This option can also become a means for developing data needed for outcomes based medicine. Potentially worth 5% in net annual cost savings. Providing community public health services for tracking the spread of infectious diseases, providing public health education especially to lower income and disadvantaged populations not only in urban areas, but rural areas of the country at a uniformly high standard of excellence provides a national security safety net against the spread of pandemics and infectious diseases. The stand-alone net value of this step is four percent (4%). Limiting time-of-death expenditures for Medicare recipients by requiring a “do not resuscitate” Health Care Directive of all Medicare recipients. Individuals who choose to have heroic medical intervention measures to prevent death must pay for these measures through other insurance or out-of-pocket. This change in Medicare is potentially worth a four percent (4%) net reduction in annual health system costs and will be especially important going forward due to demographic changes in the U.S. population over the next twenty years. Negotiating national pricing for prescription drugs purchased within the U.S. for treatment of medical conditions presently eligible for coverage under existing health insurance programs. This step may be worth three percent (3%) net annual cost savings. Implementing a national public health service requirement for health care providers who wish to be licensed to practice in the U.S. in exchange for subsiding a portion of the individual’s professional schooling costs. The value of this step is three percent (3%) net reduction in annual cost savings. Implementing a SmartCard patient health history computerized system where all the patient’s health history is stored both centrally and on an individualized SmartCard so that wherever the individual patient needs care, the complete health history of that person is available to the health care provider. The value of this step is two percent (2%) net reduction in annual health system cost savings. Systemic cost savings of thirty percent (30%) can be achieved from the combination of the above steps. Annual cost escalations put the entire economy at risk of achieving a sustainable economic recovery. However, to even begin to contemplate such systemic cost restructuring will take considerable investment of capital. It also requires immediate changes in regulations involving a host of federal agencies to better regulate structural risks from environmental contaminants that produce escalating health system costs and setting national pricing for drugs, devices, and procedures.

LYLE A. BRECHT

DRAFT 2.1 410.963.8680 - C A P I T A L M A R K E T S R E S E A R C H - Friday, October 9, 2009

Page 2 of 2