The Reform of an Unsustainable Healthcare System

Jonathan Skinner
Jonathan Skinner
Dartmouth Professor Jonathan Skinner delivered his highly anticipated lecture titled “What You Need to Know About Healthcare Reform” on Feb. 11 in the Chapel. He centered his address on the plagues of the U.S. system and what plausible solutions exist to rectify healthcare.

Skinner began his talk by providing rather disheartening data concerning the current growth path of healthcare reform in the United States, and the future implications for such a course. The U.S. enjoys the services of programs such as Social Security, Medicare and Medicaid, but does not want to pay the taxes to do so. Skinner referenced the New York Times’ economics writer David Leonhardt, stating that if these programs continue on their current growth rate, “your taxes are going up.” Medicare and Medicaid display spectacular costs as a percentage of total healthcare spending, and the figures have risen, and will continue to do so drastically, until a change occurs. Skinner asserts that “change in the current unsustainable growth path... is inevitable; the U.S. must face the manner of the change.” 

Skinner went on to discuss possible culprits of healthcare’s astronomical costs. Does the blame belong to greedy insurance or retail prescription drug companies? They comprise a grand total of 7.6 percent and 10 percent of total healthcare spending, respectively. What of physicians or malpractice claims? They comprise a grand total of 24 percent of total healthcare spending. That may seem high, but Skinner indicated that a committee comprised of specialist practitioners determines the compensation for physicians by Medicare and Medicaid. 

Skinner next raised the interesting question of wasteful demand-side spending, or spending by consumers. Consumers often make awful decisions concerning their care, inevitably due to their lack of precise medical knowledge. He next pointed to discrepancies in lifetime healthcare spending among residents of different U.S. cities.

The difference of per capita spending on healthcare between citizens of Minneapolis and Los Angeles amounts to a Ferrari. Do the citizens of Los Angeles receive better care? Skinner argued that they do not, the incongruity in per capita spending stems from the fact that consumers in the U.S. do not pay for the healthcare they receive.

The U.S. displays a mean $2,300 per capita regional difference in healthcare spending, gross factors such as illness, income and race. Skinner contends that these spending inefficiencies could be better allocated to reduce total healthcare costs. 

After presenting the harsh reality of healthcare spending, Skinner went on to suggest his proposed reforms. Most importantly, consumers should receive the care they want, as long as they can afford it. To make this more feasible, Skinner proposes that the U.S. institutes a voucher system funded by a value added tax, akin to a sales tax. Individuals wishing ‘higher quality,’ or more care can pay for it if they wish.

The U.S. would also need to foster a more accountable system, and move forward with Medicare, said Skinner. The likelihood of such a reform is currently very low; the public currently projects it at about 25 percent. Inevitably, the course of the current U.S. system will change; the dilemma of rising costs cannot simply rectify itself, as Skinner pointed out.

Skinner currently chairs the Department of Economics at Dartmouth College, teaches at the Department of Community and Family Medicine at Dartmouth Medical School and the Dartmouth Institute for Health Policy and Clinical Practice. He sits on the editorial board for Annals of Internal Medicine, the American Economic Journals: Economic Policy, and is a member of the Institute of Medicine, National Academies of Science.

Skinner’s lecture was part of the Arthur Levitt Center for Public Affairs’ Lecture Series.

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