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Jessica Greenhalgh Headshot

An Optimal Solution to U.S. Health Care

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U.S. health care is fraught with emotional prediction of ideologues including the Supreme Court. The combination of U.S. private and public health care cost, if unchecked, will exceed the budget of the federal government by the year 2027, leaving out 50+ million Americans who have no coverage, the poor and children who receive inadequate health care and the private policy holders who can no longer afford it. The annual cost increase of private health care, which is ranging between five and eight percent, is no longer affordable by employers and private policy holders. Abstracting from ideological and constitutional constrains, it is time to redefine health care in the United States as a public good, as it is in Western European countries -- a public good like national defense, public education, public parks, public roads, etc., which are made available to all citizens.

We can also implement a U.S. Health Care program. More importantly, resolving the health care issue is not complicated -- it is much simpler and far less costly than the Obama plan, assuming that the political will for solution coalesces the agenda of the President and the Congress. Given the fact that private health care will render the economy bankrupt, we should realize that government is the only solution, just as the governments in the European Union run and administer a workable health program. In the United States, Medicare has several decades of experience and a good track record keeping administrative and overhead cost below three percent. Let us merge Medicare (which serves seniors) and Medicaid (which serves low income persons) into one and provide coverage to the entire population, including 50 million that have no coverage and the private policy holders, including those that are covered by their employers. There will be no need to buy individual private insurance although the option will be available. The program, you may call it "National Medicare Program," can be financed through Social Security.

Under this program, per capita medical cost and its annual rise could be pegged to the European standard without cutting quality, as their health care indicators are at par with the United States. For instance, longevity in the United States is 75.55 years for males and 81.43 years for females, and in England it is 78.2 years for males and 82.35 years for females, while England's per capita cost for health care is about 50 percent of the United States' costs. Under these programs, U.S. physicians, insurance companies, labs, hospitals and pharmaceuticals would have to scale down and put their costs in line with the new approach. In 2010, the U.S. health cost was 17.9 percent of GDP, with a comparable figure for European Union at 8.5 percent. These culprits in the United States are responsible for the rising medical cost. If unchecked, more Americans will be without health care coverage in the future due to high cost.

Health care should be treated as a basic human rights issue, and that is the way it is being treated in most of the European Union. The United States, as one of the richest and most advanced countries in the world, must provide health care to all its citizens.

However, U.S. medical costs are astronomical. In 2010, U.S. total health cost amounted to 72 percent of the 3.6 trillion dollars budget. Additionally, the costs of health care in the US are increasing faster than the budget. By 2020, it is estimated that heath care costs will reach 4.6 trillion dollars in the United States. And upon performing analytic calculation, it was found that the total health bill will exceed the U.S. budget by 2027. This analysis was conducted by taking into account the U.S. growth rate, S&P Healthcare Economic Composite Index, U.S. health care expenditures and the U.S. budget.

One of the major issues is high physician salaries and laboratory related costs. From a British government survey conducted in 2004, primary care doctors in Europe were found to have an income ranging from $60,000 to $120,000 in U.S. equivalence in 2002 dollars. However, primary care doctors in the United States were found to have an average income of $125 to $200 thousand. So the primary care doctors in Europe were making about half that as U.S. doctors. However, it seems that the major problem comes from the fact that U.S. doctors in specialized fields started making substantially more, being able to make $400,000 per year or more. In comparison, this is the same, if not more, than the income for the President for the United States.

Furthermore, because of the higher amounts healthcare providers can make on some insurances, and with the low audit rates, some heath care professionals have been found to charge high rates fraudulently. For instance, such instances occurred in the United States vs. Luke's Subacute Hospital case, which found and convicted the president, CEO, and some employees of the hospital for defrauding Medicare by falsely inflating nursing costs.

Considering that the total costs of Medicare, Medicaid, and Obama reform will exceed one trillion dollars per year, it seems that a better solution would be to restructure the current government healthcare programs. The first step should be to entirely eliminate the Obama reform, considering it does not directly provide any healthcare insurance, and is no more than an administrative health reform providing few benefits with a large cost of $900 billion. A more efficient plan is for the Medicare and Medicaid programs to be expanded into a new insurance program that functions as a national insurance plan that covers all citizens in the United States. And since these two programs have already been successfully established for many years, in addition to Medicare having very low administrative costs, it would be more efficient than private insurance with larger administrative, fees and profit costs.

This national plan could easily be funded through the current Medicare and Medicaid revenue sources supplemented with additional taxation. Tax payers could pay an additional tax, which essentially would be a small premium for a universal healthcare plan. The taxation would still be less than having to purchase health insurance either privately or through their employer. The amount to pay into the plan should be scaled based upon the taxpayer's incomes. Anyone making less than the poverty level would not have to pay into the plan. And people not in the poverty level could be charged a progressive rate that increases as their incomes increase. The goal of the plan would be to obtain expenditures significantly lower than what the United States currently spends on healthcare. Not only would it provide better healthcare, but it would even help decrease the current deficit in the United States, prevent people from going without healthcare.

This national plan should also have a method to put healthcare providers onto more of a salary based income, charging a higher tax rate to healthcare providers making more than certain salary. Then the amount collected from this tax could also go towards funding the national health insurance plan. It has been previously proven that doctors on salaries provide higher quality of care at a much lower cost, and even President Obama attempted to encourage such a practice.

My simple, affordable solution would be to expand on Medicare to develop a national health care of Basic Health Plan guaranteed to all citizens. Making these changes could help restore our entire healthcare system quickly and efficiently. It will eliminate budget constraints on states, eliminated pre-existing conditions, include all ages, and provide an all inclusive and equal benefits to all citizens.

Nake M. Kamran (Kamrany@usc.edu), is professor of economics and director of program in law and economics at the University of southern California. Jessica Greenhalgh is student in economics and biological sciences at the University of Southern California, and a research associate of the Global Income Convergence Group (GIC-G) in Los Angeles.