Session Date: August 19, 2005

Annual Meeting Session Summary: Health Care Reform and Finance Plenary Featuring Health Economist Uwe Reinhardt

By Michael Mann
Communications Officer, Washington Legislature

This summary is provided for information purposes only. NCSL does not endorse any views it contains.

SEATTLE – Funding health care has become the primary crisis in the United States today, health care economist Uwe Reinhardt told state legislators at the National Conference of State Legislatures’ 2005 Annual Meeting. He asked “Who will come to the rescue?”

Reinhardt, the James Madison Professor of Political Economy at Princeton, likened the cost of health care to a jungle elephant that cannot be tamed, although many public and private entities are attempting to change its direction. As health care costs consume a greater share of government spending, budgets for other programs—particularly education—will necessarily decrease.

Citing projections that health care costs will skyrocket in the next 10 to 20 years, Reinhardt contended that two fundamental factors contribute to the health care crisis: first, employment-based health care is crumbling for low-wage workers; second, federal fiscal policy is abandoning health care coverage.

“The uninsured will become an even greater problem for state and local government,” Reinhardt said, as current federal fiscal policy proceeds. According to Reinhardt, faced with the projected increases in these costs, employers of every size will shift costs to employees and cut benefits.

Washington Governor Christine Gregoire agreed with Reinhardt. In her opening remarks welcoming meeting participants, she said, “… health care is in a crisis. Employer-based insurance is eroding. Health care takes away from other spending priorities.

“There are no bumper-sticker solutions,” Gregoire said, adding that state government needs to lead by example and focus on outcomes, not inputs.

Reinhardt stated that health care spending is not itself bad for the economy, although many people perceive it to be undesirable. He described increases in health care spending and tax cuts as both having a stimulating effect on the economy. Most health spending stays at home, he said, while much of the spending stimulated by tax cuts goes overseas.

Reinhardt cited statistics from the Centers for Medicare and Medicaid Services and the Congressional Budget Office in his presentation. He maintained that consumer-directed care costs more than managed care and that federal policies encouraging personal savings accounts for health care will shift costs from those who typically enjoy good health to the chronically ill. He does not support privatizing Medicare or Medicaid.

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