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Vol. LXIII, No. 13
Wednesday, April 1, 2009
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Reinhardt Surveys “Perfect Storm” of Health Care, Declares President Obama on the Right Track

Ellen Gilbert

Times may seem tough now, but Princeton scholar Uwe Reinhardt says that things are going to get a lot worse unless something is done about our health care system. Adroitly managing to speak with both the utmost seriousness while keeping his tongue firmly planted in his cheek, the James Madison Professor of Political Economy recently described the growing numbers of uninsured Americans as “dark clouds coming from the right” in a talk entitled “Health Care Sails Into a Perfect Storm: Can Obama Come to the Rescue?” at the Woodrow Wilson School of Public and International Affairs.

It would be easy to find grand entertainment in Mr. Reinhardt’s performance, what with his witty descriptions of the state of “unsurance” that prevails in America, and visual images like the one of a lumbering elephant (U.S. health care) ingesting Bill Clinton, while an arrow indicates Hillary’s location already well inside the beast.

There were numbers in his presentation too, however, lots of them, and they painted an exceedingly grim picture. Among them was the fact that the nation’s Gross Domestic Product is currently growing at an annual rate of two percent per capita, while health care costs over the same period are growing at 4.4 percent. Or the fact that right now, 17 percent of the Gross National Product is paying for health care, and, if it continues at this rate, in 50 years it will be 40 percent. Mr. Reinhardt described this projection, which was confirmed by a federal budget office study, as “a disaster.”

The disparity in income and health care costs was evidenced by illustrations showing a nine percent a year rise in insurance and out-of-pocket health care costs for a family of four since 2001, while the wage base for these same people has risen only three percent a year. Added to this already untenable situation is the fact that when people lose their jobs, they lose their health insurance. “It’s diabolical,” said Mr. Reinhardt of the double whammy imposed on those who are already down on their luck.

Other disconnects are to be found in the difference in Medicare spending per beneficiary by region, where more than twice as much is spent on elderly people living in the sun belt as is on those who live in the northwest, with the gap widening as time goes on. “Alas,” added Mr. Reinhardt, “similar inexplicable variations in health spending per capital occur also in the private insurance sector.” The challenge ahead for Congress and the Obama administration, he said, is to “muster the courage to force physicians in the high-cost states to defend their high spending.”

One of the myths dispelled by Mr. Reinhardt’s presentation, however, was the belief that an aging population is driving up health care costs. Instead, he identified the disparity between spending and quality of care as a prime culprit, saying that younger people are bankrupting the system by demanding ever-more “fantastic” drugs and procedures. Rather than worry about coming generations, he suggested that we “look after our people — veterans, waitresses, and cab drivers” who need help now. He also noted that the current economic crisis was brought about by “consumers maxed out on credit,” and said that it would have happened even if bankers had been “pristine” in their behavior.

President Obama is on the right track, according to Mr. Reinhardt, as he declared that “judiciously targeted government spending on health care (for the uninsured, for health information technology and for cost-effectiveness research) could be a powerful part of any economic stimulus package in 2009-2012.” While he expressed concern about resistance from the private health insurance industry and “its friends on Capitol Hill,” he hoped that there could be “reconciliation” among the groups involved.

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