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The US health care system boasts some of the most advanced technology, procedures and pharmaceuticals in the world, but is in urgent need of a checkup. We have more than 40 million uninsured Americans and face runaway growth in health care costs. Rapidly increasing costs will cause the Medicare trust fund to go broke in six years and Medicaid is devouring state and federal budgets at an alarming rate. Rising health care costs in the private sector are forcing employers and employees to reduce or drop coverage. The Obama Administration has trumpeted a national health plan as the panacea, but with two out of control federal health insurance programs, we should be cautious about introducing a third to “fix” the private system.

Today, the private sector bears much of the cost of the uninsured population. Millions of uninsured access the health system through hospital emergency rooms and receive care that is ultimately borne by the private sector. Insurance is available for many of them today. Twelve million uninsured are currently eligible for Medicaid but not enrolled. Surprisingly, in 2007 when Massachusetts mandated insurance coverage, they found that nearly half the 450,000 uninsured were eligible for Medicaid. Undocumented aliens represent an additional 10 to 12 million of the uninsured. And finally, some people can afford private insurance but opt not to purchase. In fact, 16 million uninsured live in households with annual earnings above $50,000. The private sector pays the bulk of the bills for the uninsured people, making private insurance even more expensive.

The private sector also pays for low payments made by the government’s existing programs. Medicaid and Medicare (which are the largest health care payers in the country) already pay less than the fair cost of hospital and physician services. This costs the private pay system $90 billion each year (about 25% of private pay spending) to make up the shortfall. As a cost-saving initiative, President Obama recently recommended reducing Medicare payments to hospitals and other providers by $300 billion over the next 10 years. Further cuts to physician and hospital reimbursement may be politically expedient, but do not address the underlying problems with Medicare and merely shift more and more costs to the private sector.

Before we contemplate an enormous expansion of the role of government in providing health care coverage, we should urge our leaders to start by reducing the rolls of the uninsured in ways that only the government can. First, the government must develop a workable plan for dealing with the 12 million undocumented immigrants, who cannot get insurance. Second, the government should take steps to enroll the 12 million citizens who are eligible for Medicaid, but remain uninsured. And finally, mandating minimum insurance requirements for all citizens – including the more than 10 million uninsured healthy younger Americans – would go a long way toward giving all people insurance, and reducing the cost of private insurance.

Unfortunately, taming the runaway costs of Medicare and Medicaid involves difficult political decisions, and the Obama administration and Congress seem inclined to kick the can down the road. It is much easier to introduce a new middle class entitlement and declare victory.

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