FOR IMMEDIATE RELEASE

August 30, 2006

CONTACT:     Susan Miller

                    317.816.9760, ext. 247

                    smiller@hickmanassociates.com

Health Savings Accounts, Single Payer Systems and Medicare Solvency

Forum Focuses on Issues Driving Health Care

(August 29, 2006 – Indianapolis, IN) Four of the nation’s leading thought leaders in the area of health care finance discussed key issues driving health care expenditures – a number that represents 16% of U.S. GDP – as well as possible solutions to the health care funding debacle, on Tuesday, August 29 in Indianapolis.  In the absence of policy reform, projections show this share rising to 20 percent to 33 percent over the next 25 years.  This would make health care expenditures the largest share of national spending, larger than national expenditures on food or housing. On either basis, the numbers are projected to continue to climb over the subsequent 50 years. The Health Care Financing Bomb:  Where’s the Money (or the Solution) was presented by Networks Financial Institute at Indiana State University. 

Dr. John C. Goodman, president and founder of the National Center for Policy Analysis, frequently credited as the “father of the Health Savings Account,” examined the depth of the health care deficit today as well as how consumer driven behaviors are beginning to change the health care landscape.  Goodman noted that all governmental spending today including defense, education, etc. represents approximately 30 percent of GDP.    Goodman noted that health care costs alone will likely exceed 30 percent of GDP by the year 2050; an impossible expense for the economy to incur.  Goodman advocated for a consumer driven approach to health care, where more health care decisions and responsibilities are shifted from the doctor to the patient. 

Dr. Goodman described the current, third-party payment system as one hindered by bureaucracy and inefficiencies, noting that more than 7,500 individual physician tasks are codified by Medicare. Variances in billing practices, a lack of consistent quality in coverage, poor technology and the lack of a transparent pricing structure are among the weaknesses of the current system.  “The problem is not the doctor, it’s the system that pays the doctors,” he noted. 

Demographics are another key factor impacting health care.  As the Baby Boomer generation begins to retire and employers continue to restrict their employee benefit programs, Goodman predicts that the Baby Boomers will drive a change in the insurance industry.  He noted that while health insurance has traditionally been considered a fringe benefit, increasingly employees are staying in a job or selecting a job based on the coverage offered.  Goodman said that it is not so much the cost of the health care as the difficulty in accessing it that is impacting American consumers.  “Healthcare can be free or accessible, but not both.  We’re providing it nearly free, but it’s not easy to get,” he said.  Portability of insurance as employees retire or change jobs is likely to be a significant issue in the years to come.  Of the 77 Million Baby Booomers, 80 percent will retire before becoming eligible for Medicare.  Employer-defined contributions to health savings accounts are likely to become much more common in the future, Goodman noted.

 Goodman pointed to some signs indicative of a more consumer driven approach to managing health care.  In 2005, 95 million Americans conducted online medical research.  The practice of securing online consultations and online second opinions is also beginning to emerge.  Some drug and diagnostic manufacturers are developing self-monitoring devices and new online options for prescribing drugs and even ordering blood tests online.  The emergence of fee-based concierge health services, telephone/online physician visits and minute-clinics are also impacting the way consumers receive their healthcare. 

David Gratzer - Lessons Learned from Canada and Europe

Dr. Gratzer, a practicing psychiatrist and senior fellow at the Manhattan Institute is a native Canadian and well-versed in the single-payer health care system.  The overriding message from Dr. Gratzer: Single payer systems are not the panacea supporters purport them to be.  He pointed to the steady emergence of private clinics in Canada as a signal that government-sponsored health care is not serving the needs of its citizens.  On average, one private clinic is introduced in Canada each week and the newly-elected President of the Canadian Medical Association has been among the staunchest critics of publicly-funded health care programs.  Gratzer spoke of excessive waits – measured in days for ER visits and months for important tests – a shortage of doctors, lower investments in research and technology, and outmoded equipment as a few of the problems created by central planners responsible for building and sustaining Canada’s health care system.  “Universal health care is proven to create a surge in demand. Planners are unable or unwilling to invest the dollars necessary to support that surge,” Gratzer noted.  The problems are not specific to Canada, but are apparent in other countries with socialized medicine.  Gratzer cited survivor rates for diseases such as prostate cancer in the U.S. versus other countries.  The mortality rate for prostate cancer in the U.S. is less than 20 percent;  in Germany and Britain, survival rates are 35% and 40% respectively.  Similarly, women who get breast cancer are likely to be diagnosed later in Canada and Europe and to have lower survival rates than in the US.    

According to Gratzer, politicization, whereby popular drugs become covered at the expense of less well-known drugs frequently occurs in a universal funding environment.  Health care clinics and facilities in rural areas with fewer voters are usually among the first to close due to budgetary constraints.  Bureaucracy – Gratzer cited that a Manitoba law requires investments above $10,000 be approved by a province Treasury – further bog down the system and hinder innovation.  Gratzer closed by summarizing that socialized medicine would negatively impact care, impede research and development and not result in a more content market.  He cited a 2000 Canadian poll indicating 80 percent of Canadians felt their health care system was “in crisis.”

Dr. Thomas Saving, Where Will the Money Come From

Dr. Saving serves as the Director of the Private Enterprise Research Center at Texas A&M University and is a member of the Board of Trustees of the Social Security and Medicare Trust Funds.  Dr. Saving outlined the implications associated with paying for Medicare as the first Baby Boomers reach Medicare eligibility in 2011. Proposals to address this funding need have focused largely on tax increases which would be absorbed by younger workers.  Those taxes would have to rise by more than 60%.  Alternatively, if the retired beneficiaries of medicare had to bear the projected cost increases, middle and low income retired would lose more than all of their social security to make the necessary payment to for Medicare and even the highest social security recipients would have to give back 80 percent of their social security checks to pay for increases in the cost of Medicare under existing official arrangements.  Obviously the existing arrangements are not sustainable, according to Saving.  Such large tax increases or benefit cuts cannot occur.

Other proposals on the table include means-based premium increases and raising the age to qualify for Medicare eligibility.  “Raising the age of entry by a few years will not significantly impact costs,” Savings stated, nor would premium increases be well received by older voters.  Savings summed up the forum echoing the “individual consumer” messages of Dr.’s Goodman and Gratzer.  “When buyers don’t care what it costs, neither do the sellers.  The transparency of pricing in the health care market is a key problem,” he stated.  “Imagine seeing a hospital billboard that advertised what a room stay costs every day before you check in,” he said.

Dr. Douglas Holtz-Eakin, U.S. Reform: Why, When and How?

Dr. Douglas Holtz-Eakin is Director of the Maurice R. Greenberg Center for Geoeconomic Studies and Paul A. Volker Chair of International Economics at the Council of Foreign Relations.  Until recently he served as the Director of the Congressional Budget Office, where he led studies of Medicare and its reform.  He explained that the cost and expenditures for Medicare are likely to rise so much that the Medicare program would be a greater share of federal spending than all existing federal spending is today.  Such a change, together with a likely increase of the overall healthcare burden to 55 percent of US spending and output over the next 50 years,  is unsustainable.

Holtz-Eakin agreed with the other participants that reform is inevitable and suggested that for both economic and political reasons the time for change is now.  Otherwise, he explained, the three basic pillars of the US economy, a large and robust private sector and low taxes and public spending compared with other developed countries, would be in jeopardy.   When Baby Boomers start to qualify for Medicare in 2011, the unsustainability of the system and its threat to the strength of the underpinnings of the economy will emerge very quickly.  To avoid this will require that actions begin right away. 

Holtz-Eakin discussed several steps to reform Medicare, emphasizing the role of consumer-driven health care and more market based solutions.  He suggested that how we transition to providing long-term health care is going to be the litmus test of reform because currently this care is largely provided outside the market place by relatives. In future, market based approaches will be required as the relative numbers of care givers and those requiring care change.