Peter Orszag: Involvement with Healthcare Reforms

Why are healthcare reforms important? Peter Orszag has stated that the US deficit impact of healthcare costs dwarfs that of any other fiscal policy variable. He predicts that if the costs per user of Medicare and Medicaid increase at the same rate for the next forty years as the previous forty, the rise in expenditure will be from around 5% of GDP to 20%. This gargantuan leap makes the oft-cited 5 to 6% increases in social security costs across the same time period look puny in comparison.

The above supports Peter Orszag’s general view that getting a grip on the spiraling costs associated with healthcare is vital to the fiscal future of the US. It’s not all doom and gloom, however. One of the things Peter Orszag highlights is that the cost of care is nowhere near even across the country. In fact, not only do costs vary between regions, but within them – between doctors and hospitals located near each other. In fact, Medicare spending in 2006 was three times more in some parts of the US than others. This is not because of different diagnoses, as the patients in these statistics were clinically similar.

Peter Orszag points out that despite the high variability in the cost of care across the country, the outcomes of treatment are often the same. This is akin to a can of Coke costing three times as much in a Wal-Mart in San Francisco as one in New York. It’s strange, because everyone gets the same product. All the extra costs seem to cover are more complex and extensive testing and procedures, which don’t have a noticeable effect on the end result. By directing the system towards techniques and practices used in the lower-cost areas, Peter Orszag, along with other economists, believes that the savings could be in the order of $700 billion, or 30%. This would be achieved without sacrificing any of the quality of service that US healthcare is known for.

Surely doctors, insurance companies, pharmaceutical groups and other interested parties are up in arms about this idea? Actually, no. A recent meeting with the president saw them pledge to aggressively reduce costs with the aim of cutting growth in spending every year for the next ten by 1.5%. This may not sound like a lot, but Peter Orszag believes that a $2 trillion saving is possible over the next decade – putting up to $2,500 more every year into the pockets of the average family. Through health information technology, further research, prevention and incentivization – things which the current administration has already taken important steps in – Peter Orszag believes that the nation will put itself on a more sustainable fiscal path.

To learn more visit http://www.peterorszagonline.net & http://www.peterorszagsite.com.