BE OUR GUEST: IF HEALTH CARE BASIC RIGHT, WE MUST ALL BEAR COST TO PROVIDE IT

Richard B. Hansen holds a doctorate degree from the University of Nebraska. He has taught at the university level for 16 years, and is in his fifth year as an associate professor in the department of economics at Southeast Missouri State University. He currently teaches a course on health economics.

We hear that there is a health care crisis in this country on two fronts. One involves the size and growth of health care costs. The other concerns people who lack health insurance and fail to qualify for government help.

Since 1960, the share of what we produce that is accounted for by the medical care sector has grown from 5 percent to 13 percent. This is certainly noteworthy, but is it too much and does it mean that a crisis exists? (One wonders whether people would be concerned if automobile production had increased as much.)

It is difficult to determine the right amount of health care to produce. After all, providing it requires sacrificing other products we would like to have. There is, however, little doubt that we spend more than is necessary for the level of care we now receive for two major interrelated reasons.

Today, we pay only 20 cents of each dollar's worth of medical care we consume out of our own pockets (vs 55 cents 30 years ago); the remainder is paid through third parties, mostly government programs and employment-based health insurance. Neither government nor business, of course, pays for health care; we pay for it in the form of reductions in the size and purchasing power of our take-home pay arising from lower wages, higher taxes, and higher prices.

Also, an estimated 30% of the health care we do produce is unnecessary. This owes partly to our being insulated from direct responsibility for the greater portion of the care we purchase. It also stems from the fact that the public does not know, and the medical community does not agree on, how best to diagnose and treat many health problems.

Most of the escalation in health care costs derives from costly improvements in medical technology. Relatedly, access to these advances that prolong and improve the quality of life is viewed increasingly as a fundamental right. The balance of the growth is primarily due to the aging of the population. (Other often cited reasons for the increase, including administration costs and malpractice litigation, account for only a small share of it.)

While 15 percent of the population is without third-party coverage at any one time, it is not the same people all of the time. Half of those who experience a loss of coverage are without it for fewer than four months. There are, of course, people who are chronically without the means to obtain health care, and we should certainly consider ways to improve their access to it.

Attempts are being made to control health care costs. "Managed" health care is furnished by enterprises such as Health Maintenance Organizations (HMOs) that, in exchange for a fixed payment from their subscribers, keep expenses down by dispensing more preventive care and guarding against unnecessary care being furnished. Large health insurance companies establish Preferred Provider Organizations (PPOs), using their market power to bargain for discounts from the providers in exchange for sending their clients to them. The federal government has created a "prospective payment system" (PPS) whereby hospitals are paid a predetermined amount of money for Medicare patients with a given diagnosis. A few states place their Medicaid clients in managed care programs, use a prospective reimbursement system, or invite competitive bids from health care providers. The government and, increasingly, private health insurance companies employ "utilization review" programs that attempt both to preclude unnecessary care and to ensure the quality of care that is provided.

These efforts, however, will not eliminate the problems. Although the government's prospective reimbursement program, for example, has reduced the costs of covering Medicare recipients, providers have mainly shifted the unpaid costs to other groups of patients. And, even though health care costs are lower in managed care systems, their costs have rise at about the same rate as have the costs of traditional fee-for-service care; indeed, this pattern is also found in most other developed countries. This, while we can doubtless learn from studying other nations' health care systems, it is naive to think that we need only transplant them here.)

Realistically, it will be nearly impossible to simultaneously curb our spending on health care and increase people's access to it, political rhetoric to the contrary notwithstanding. There is, to be sure, waste in the system that could be pruned (including the 10 percent of our health care dollar that pays fraudulent claims and the frequently unnecessary duplication of expensive medical equipment by hospitals.) Effective measures to accomplish this will have to incorporate changes in the incentive structure so that those who make the decisions about how much and what type of health care is produced have a greater stake in keeping costs down.

Beyond that, however, controlling health care costs will be very difficult mainly because its growth is largely attributable to medical advances that would be hard to deny to people. Also, statistics reveal that about 50 percent of the spending on health care is accounted for by 5 percent of the population during a given time period and that nearly 90 percent of the average person's medical bill is incurred in the final two years of life, considerations that further confound the goal of cost containment.

In one way or another, the question of whether we are willing and able to make this increasingly beneficial and expensive medical technology available to everyone will be answered. We have only to choose whether we will participate in resolving this issue or will leave it for others to settle.

This does not mean that we will have to decide whether health care should be rationed; it is rationed now. It does mean that we will have to determine whether we want to change the criteria by which it is distributed. If we continue to take the view that health care is a basic right, we will have to realize that this creates an obligation for all of us to bear the costs of providing it. It is both as simple and as difficult as that.