Recent Reports on Health Care Reform

Abstract

T the federal government spent almost $300 billion on health care programs (including Medicare and Medicaid) during Fiscal Year 1996, almost 20 percent of the entire federal budget. In the economy as a whole, health care spending accounts for one-seventh of gross domestic product. Based on size alone, the health care sector should command the attention of public managers and policy analysts. More importantly, health care requires special attention because of its farreaching impact on people's lives, the extent of government involvement in the market, and the highly contentious public debates about health care reform that have occurred over the last four years. The two studies presented here highlight important issues in the health care arena. Medicare is the primary federal government program that finances health care for the elderly. Its exponential growth (Medicare is expected to cost $229 billion in Fiscal Year 2000, 32 percent above 1996 spending) has placed it at the center of budget-cutting proposals. While Republican attempts in the 104th Congress to reduce Medicare spending were defeated, ideas for restraining spending growth have become an important part of the national political agenda. In Restructuring Medicare's Cost-Sharing, Marilyn Moon, a senior fellow at the Urban Institute, examines one option for reducing Medicare spending: increasing the health care costs borne by beneficiaries through higher premiums, deductibles, or co-insurance. Her study is especially relevant for managers and analysts who work in health care organizations or who research health financing alternatives. The number of Americans without health insurance has concerned many managers and analysts in the health care field. The uninsured consume less health care than the insured and suffer from worse health. Hospital care for the uninsured increases insurance costs for everyone else because hospitals pass on the costs of uncompensated care for indigent patients to third party payers, The Kennedy-Kassebaum bill passed by congress in 1996 is supposed to reduce the number of the uninsured by assuring that people who have lost their group coverage or switched jobs can not be denied private insurance because of a pre-existing condition. Gary Claxton and Larry Levitt of the Lewin Group assess the impact of this legislation in Reform of the Individual Health Insurance Market. They conclude that unless the states set limits on the premiums insurers can charge those with pre-existing conditions or subsidize the enrollment of highrisk individuals, the statute will do little to expand coverage. Summaries of each study appear below.