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Dollars and Sense & Health Care Reform

Posted Dec 30 2009 12:00am

uscurrency_federal_reserveWith health care reform approaching its culmination point, like all things most memorable of the past year, the overarching question remains, “How much will this cost us?”  As it currently stands, the House version of health reform will cost an estimated $1 trillion over a decade, while the Senate version comes in at $871 billion.  Next, comes the obvious second question, “How will the government pay for it?”  As Kaiser Health News summarizes in its recently released guide to health reform:

Both bills hit up the wealthy, but in different ways. The House would impose a 5.4 percent income tax surtax on individuals who earn more than $500,000 a year and couples that earn more than $1 million. The Senate would increase the Medicare payroll tax rate from 1.45 percent to 2.35 percent for people who earn more than $200,000 a year and families that earn more than $250,000.

To raise money to pay for the legislation, the Senate would impose a 40 percent tax on the portion of most employer-sponsored health coverage that exceeds $8,500 a year for individuals and $23,000 for families. The Senate also would raise the threshold for deducting medical expenses to 10 percent of income, up from 7.5 percent.

Overall, the financing provisions could spur a pitched battle; the House hates the Senate tax on high-cost policies, while the Senate opposes the House’s income-tax surcharge.

In addition, many Americans worry that efforts to contain costs within the bills will lead to decreased standards of care.  As a New York Times piece reveals, however, this may not be the case.  The article examines the health system in Richmond, Virginia, where there are stringent state infrastructural expansion guidelines placed on health care practices and hospitals to contain costs.  The state requires large medical infrastructural expenditures by health care providing institutions– in the form of hospital expansion or even major equipment purchases– to be approved by the state through a “certificate of need.”  Neither of the House or Senate bills  includes such a provision, but there is a great deal of speculation that the oversight and cost-cutting measures in both will have a deleterious impact on the quality of health care.

While Richmond spends less than average per capita on Medicare than other metropolitan areas, patient outcomes are better than average. The Times reports

The quality of care in Richmond is better than in most American metropolitan areas, according to various measures, and it continues to improve. Medicare data, for example, shows that Richmond hospitals do a better-than-average job of treating heart attacks, heart failure and pneumonia.

But perhaps the most interesting aspect of the Times’ analysis relates to those states that do not police their health care infrastructure expenditures– or, as in South Dakota, had done so formerly, but ceased to do so.  When South Dakota “scrapped” its certificate of need program, one chief operating officer reported going on an expansion binge. In such cases, the number of patients that providers treat is said to correspond proportionally to the level of health care resources available.  One medical officer found this “supply-sensitive” phenomenon to mean that the more hospital beds a hospital has, the more patients it is likely to see.  Build it and they will come– or perhaps more to the point– they will be sent. At our expense.

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