One reason the United States spends more on health care than other countries is that we are obsessed with health insurance instead of health care.
When the British National Health Service or the Canadian Medicare system spends additional money, they spend it employing doctors, building hospitals, or buying medical equipment. When the U.S. government spends more money, we give it to insurance companies.
Take Obamacare. We are currently spending $214 billion a year insuring people through Medicaid (which is mostly contracted out to private insurers) and the Obamacare exchanges. At $1,731 for every household in America, that’s a great deal of money being transferred from taxpayers to insurance companies every year.
What are we getting for all that spending? Are people getting more health care? If they are, what difference is that making?
Few people find these questions interesting. In a Google search on “Obamacare,” every article I encountered discussed health insurance, but not health care. Even at the Obama Foundation website, the focus is entirely on insurance, not care.
Doctor Visits Have Fallen
Nonetheless, one scholarly study finds there has been no overall increase in health care in the United States since the enactment of Obamacare. The number of doctor visits per capita actually fell over the last decade. That’s surprising, because our population has been aging, and older people require more health care.
Unfortunately, there is nothing particularly new here. When Obamacare was enacted, it was expected to cost close to $1 trillion over the next 10 years. But there was no serious discussion of what we were going to buy with all that spending—not in Congress, not in the mainstream media, or even in the health policy community.
To have more health care, we must have more doctors, more nurses, more hospital beds, and so on. Without any increase in supply, for one group of people to get more care, some other group must get less.
We saw a vivid illustration of that during the COVID pandemic. To tend to the needs of a sudden surge in COVID patients, health care providers had to delay care for the non-COVID patients.
Throwing Money at the Problem
Our experience with Obamacare is like our experience with every major health program Congress has passed or even considered. We begin with a claim of unmet needs; we decide on a large sum of money to throw at the problem; but we never ask how the money can meet the unmet need if nothing is done on the supply side.
Medicare for the elderly and Medicaid for the poor were huge programs, even when they started in 1965. In a short period, the number of people who lacked health insurance dropped from nearly 25 percent to under 15 percent of the population.
As a result, physician visits by low-income people increased 6.2 percent and surgical procedures among the elderly increased 14.7 percent. However, since there was no increase in the ability of the system to supply medical services, these increases were offset by a decrease in care delivered to the non-poor and the non-elderly. A study in the American Journal of Public Health found that “society-wide utilization of medical care remained unchanged.”
Even though there was an increase in health care services for seniors, Massachusetts Institute of Technology Professor Amy Finkelstein discovered the passage of Medicare had no effect on the health of the elderly—at least as measured by mortality. The additional spending set off a bout of health care inflation, however, for all patients.
No Increase in Utilization
Under Obamacare, the number of people without health insurance fell from 15.5 percent of the population in 2010 to 7.9 percent by 2022. Yet the study cited above found health care utilization across all of society did not increase at all.
There was some shifting, as low-income patients got more care, but that care was offset by reductions elsewhere in the system. In particular, “a 3.5-percentage-point increase in the proportion of persons earning less than or equal to 138 percent of the federal poverty level with at least one office visit was offset by small, nonsignificant reductions among the rest of the population.”
Taxpayers Foot Drug Bills
You might think prescription drugs are different. If Congress expands government insurance for drugs, the drug companies can supply as much as patients demand. But here again, there appears to be no limit to Congress’ ability to waste taxpayer money.
When Congress created Medicare Part D to pay for drugs in 2003, it created a $15.6 trillion unfunded liability for the federal government, looking indefinitely into the future. That was more than the unfunded liability in Social Security.
Yet, economist Andrew Rettenmaier discovered only seven percent of the benefits bought new drugs for seniors. The other 93 percent simply transferred to the government (and therefore to taxpayers) the bill for drugs the elderly or their insurers were already buying. Only $1 in every $13 represented a new drug purchase.
Interestingly, the help given to the small number of people who were not otherwise getting medications reduced Medicare spending, as drugs were substituted for more expensive doctor and hospital therapies. But this profit on the truly needy was overwhelmed by the cost of giving the benefit to those who didn’t need it—a cost that has created an enormous obligation for current and future taxpayers.
John C. Goodman, Ph.D. (johngoodman@goodmaninstitute.org) is co-publisher of Health Care News and president and founder of the Goodman Institute for Public Policy Research. A version of this article appeared in Forbes on January 18, 2024. Reprinted with permission.
