Health care costs... What now?

David Leonhardt, New York Times columnist and reporter

TEXT OF COMMENTARY

Kai Ryssdal: Congress still has a couple more days off before the first session of the 112th Congress on Wednesday. Republicans, as you know, will be in control of the House. They've made it clear that they want a do-over on the health care law, if not an outright repeal. So are we going to be spending 2011 re-debating health care policy?

This week we're going to hear from some people about what the future might hold, a series we're calling: "What Now?"

Up first, commentator and New York Times economics columnist David Leonhardt on health care costs.


David Leonhardt: The past decade hasn't been a very good one for most people's paychecks. Is there any hope that the situation will improve in 2011? Here's one thing that would make a big difference and doesn't get much attention: The amount of money that employers spend on health insurance. And there are actually a few reasons for optimism.

Let's start with some basics: Every company has one big pool of money that it can spend on compensation. The company doesn't care whether that money goes toward salaries or toward benefits. Either way, it comes out of the bottom line. So the more money that is spent on health benefits, the less that's available for salaries.

We don't have to look back very far to find a time when medical costs were kept in check and salaries were rising. For much of the 1990s, insurers were making a serious effort to hold down medical costs. So spending on health benefits rose slower than inflation. Not coincidentally, the '90s were also the last time workers received nice raises. Yes, there was also an economic boom at the time. But the slowdown in health costs mattered much more than is often understood.

Look around today, and you'll find a few hopeful signs that we're on the verge of another campaign to rein in health costs. Some employers and insurers, including Aetna, are experimenting with policies that do not cover the full costs of certain expensive treatments. Why does that matter? Some of those treatments have not been shown to be any more effective than cheaper ones. Brand name drugs, for example, are often no better than generics.

The big question, of course, is how health reform will affect costs. It's impossible to know, but many economists predict that the law will reduce cost growth.

Now, no one thinks that slowing the growth of health costs will be easy. Any changes will inevitably raise concerns that the quality of care could suffer. But when you consider how much more money the United States spends on health care than any other country, there is every reason to think that we're wasting a lot of money. That money isn't making us any healthier -- and a lot of families sure would like to see it fattening their paychecks instead.


Ryssdal: David Leonhardt writes The Economic Scene column for The New York Times. Tomorrow, Bethany McLean on the future of financial regulation.

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