During the last Republican presidential debate, Herman Cain argued that, as a survivor of colon and liver cancer, he would have died if “Obamacare” had been in place when he sought critical treatment. It was a stunning statement, and it certainly underscores the real concern that people have with bureaucratic control of their health care.
Critics of the Patient Protection and Affordable Care Act (ACA)—intended to make healthcare access universal—claim that it would not do enough to control costs, particularly costs of government healthcare entitlements. This criticism is not entirely justified. The Affordable Care Act includes several provisions for controlling healthcare costs. Those provisions to control costs, however, will probably not be fully implemented because of a fundamental contradiction between the universal health care many Americans want and economic reality.
One of ACA’s most important steps to control costs is the inclusion of a plan to create an Independent Payment Advisory Board (IPAB), which is to consist of 15 full-time members, appointed for staggered six-year terms. The IPAB must report to Congress on how to hold Medicare spending within legislated limits. Congress is given a strict timetable to consider the board’s recommendations and vote on them or come up with alternatives that achieve comparable savings.
If all low- and moderate-income Americans are going to enjoy access to subsidized health care as envisioned by the ACA, then the government needs an organization like the IPAB to control costs. Without such an organization, or if Congress does not give it enough power, Medicare costs will continue to rise to unsustainable levels. A similar approach is needed to control Medicaid costs.
It is doubtful, however, that politicians will give the IPAB enough power to control costs like many of its proponents intended. Politicians in both parties are calling for repealing or weakening the IPAB. This is because, to be successful, the board must make tough choices to limit the most costly and least effective kinds of care. Most likely, this would require some method of rationing health care, although the IPAB is officially forbidden to make recommendations that would result in “rationing,” raise premiums, or increase the share of healthcare costs borne by patients. Few Americans would tolerate having their health care rationed.
Yet, those who support “universal health care” without also recognizing the need to use some method to ration health care are living in a dream world. In practice, universal health care requires that no one is denied access to basic health care because of an inability to pay the cost; prices will not be used to ration care. Because health care is a scarce good, some other rationing criterion must be used instead of prices. In some countries, such as the United Kingdom, health care is rationed by having people wait their turns, with the result that some illnesses become untreatable before the patient can get the necessary treatment. For example, because of delays for colon cancer treatment in Britain, 20 percent of the cases considered curable at the time of diagnosis become incurable by the time of treatment. That statistic is not lost on survivors like Herman Cain.
Many Americans want the benefits of a free-market system and the benefits of subsidized, “universal” health care at the same time. In a free market, people can consume as much health care as they are willing to pay. When government subsidizes health care, it enables people to consume more than they are willing to pay for. Hence, healthcare costs continue to rise until government can no longer afford to pay its share. Even without healthcare reform, the cost of government healthcare entitlements—including Medicare, Medicaid, and the Children’s Health Insurance Program—are rising to unsustainable levels.
If federal and state governments hope to meet their financial obligations, government spending must be brought under control. If current trends continue, the Congressional Budget Office estimates that by the middle of this century, spending for healthcare entitlements will be more than half of all spending by the federal government. Thus, controlling government spending requires reducing government spending on health care. This means that politicians must either abandon the attempt to guarantee universal access to health care, as exemplified by the ACA, or grant an organization like IPAB the powers necessary to control costs. This would most likely involve some method of rationing. Expanding access to health care without cost control will further hasten the bankruptcy of the U.S. government. If that happens, fewer people will have access to health care than was the case even before Congress passed the ACA.
If the ACA’s provisions to expand access to health care survive, don’t be surprised if the U.S. government eventually faces a sovereign debt crisis similar to what Greece is now facing.