Economic Report of the President 1994 - The American Presidency ...

ance premiums and ever-higher medical bills. And at the level ofFederal and State and local governments, rising health care costsmean that health expenditures claim larger and larger budgetshares, with less left over for essential competing demands likepublic safety, infrastructure maintenance and expansion, and improvementsin education and training. Despite a sustained reductionin real discretionary spending, the Congressional Budget Officeprojects that escalating health care costs will be the dominantforce pushing Federal budget deficits back up as the 20th centurynears its end.The facts speak for themselves: The United States faces a healthcare crisis that demands a solution, both for the health of its citizensand for the health of its economy over the long run.For analytical purposes, this crisis can be divided into four separatebut interrelated parts. First, the current system fails to providehealth security for millions of Americans, both insured anduninsured. Insured Americans do not have health security whenthey face the prospect of losing their coverage if they lose or changetheir jobs. Some estimates suggest that such worries may reducejob mobility by as much as 25 percent. The health security of theuninsured is still more precarious: Even when they do manage toobtain care, the evidence indicates that they receive less treatment,are sicker, and suffer higher mortality rates than the insured. Itis simply not true, as some claim, that all Americans get decentcare when they need it.Shortcomings in private insurance markets are a second and relatedproblem. Under the current system people who are lesshealthy pay more, sometimes much more, for insurance than peoplewho are healthy. Insurance for those with preexisting conditions isoften either unavailable or available only at prices that put it outof reach for many Americans. And many insurance policies simplydo not cover a variety of large financial risks—exactly the kinds ofrisks that insurance is designed to address in the first place.The third problem in our current health care system is the lackof effective competition, which in turn weakens the incentives forboth providers and consumers to make cost-conscious decisions. Inadequatecompetition is a major reason why the costs of the Americanhealth care system are so high. Studies suggest that a varietyof common procedures are often performed in circumstances wherethey are inappropriate or of equivocal value on purely medicalgrounds. Fee-for-service providers clearly have an incentive to providemore care, including care that is inappropriate, because theyare generally reimbursed for each additional test or procedure theyperform. Consumers often do not have the information they needto evaluate whether a particular service is indicated, and some donot have the choice among providers that might allow them to132