Center for Studying Health System Change

Controlling Health Care Costs; Both Presidential Candidates Sidestep Issue

Ginsburg New England Journal of Medicine Article Examines Candidates' Health Proposals

News Release
Oct. 14, 2004

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ASHINGTON, D.C.—While both presidential candidates have served up proposals to ease voter angst about the affordability of health care, neither candidate tackles the core issue of controlling health care cost growth, according to an article by economist Paul B. Ginsburg, Ph.D., in the Oct. 14 New England Journal of Medicine.

Per capita health spending increased 39 percent between 1999 and 2003 for privately insured people, while workers’ average hourly earnings grew only 14 percent, according to Ginsburg, president of the Center for Studying Health System Change (HSC), a nonpartisan policy research organization funded primarily by The Robert Wood Johnson Foundation.

The main driver of health care spending increases over time has been new medical technology. Although many advances are extremely valuable, others have only slight benefits for patients and some are ultimately found to be harmful—the result of rapid diffusion without rigorous research on medical effectiveness of comparable treatments, Ginsburg notes. When health costs increase at a much faster rate than incomes, many people can no longer afford health insurance. Both presidential candidates have proposed ways to expand health coverage and keep coverage affordable, but both largely rely on increased government subsidies rather than proposals to slow underlying health care cost growth.

"For example, Kerry proposes reimbursing employers-sponsored health plans for 75 percent of catastrophic costs of more than $30,000 per person as long as employers pass on the savings to employees by reducing their share of premiums. This proposal for reinsurance would increase affordability not by slowing cost trends, but by substituting government payments for employee payments. Bush also emphasizes affordability rather than cost containment in his proposal for a tax credit for the purchase of individual insurance," the articles states.

Along with examining the candidates’ health proposals, Ginsburg outlines four basic options to slow health care spending trends:

• increase the efficiency of health care delivery;
• increase patient financial incentives to limit the use of medical services;
• increase administrative controls on the use of medical services; or
• limit the resources available to the health care system.

Obstacles to all four approaches of slowing health care cost trends are considerable. "For one thing, all health care spending represents someone else’s income, and those facing a loss of income will work to block efforts to contain costs. In addition, each of these options, with the possible exception of the first, requires some people to get less medical care than they would like," Ginsburg writes.

"For the most part, our leaders have been unwilling to acknowledge the inherent tradeoffs between health care costs and people’s access to health care," Ginsburg continues.

Bush and Kerry are no exception, which isn’t surprising since presidential campaigns are about doing things for voters not taking things away.

"We can only hope that whoever is elected president will move beyond campaign-trail rhetoric and provide needed leadership for a candid national discussion about health care costs," Ginsburg writes. "If not, we will find ourselves on a downward spiral, as more and more resources are used to pay for the health care of fewer and fewer Americans—a potentially intolerable situation."

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.