FORTUNE MAGAZINE Value Driven by Geoff Colvin

3 big health-care myths

With historic legislation on the line, the spin is coming from all sides. Here's how to sort through it.

By Geoff Colvin, senior editor at large

How to learn more
1. Read up. To understand how an existing federal health-care program is working, read the 2009 Medicare Trustees report. The part about the $46 trillion unfunded liability is on page 201.
2. Check your plan. To figure out how reform proposals would affect you, find out how much your employer spends on your health-care coverage annually. Most people have no idea.
3. Listen to real people. Your U.S. Representative is probably holding town hall meetings on health reform during the August recess. Attend one to get an unfiltered view of public opinion on the issue.

(Fortune Magazine) -- One of Washington's true epic battles will play out over the next several weeks. It's the fight over health-care reform, of course, and it will be big, brutal, and ugly.

The stakes are high -- trillions of dollars, the reelection prospects of hundreds of legislators, and President Obama's legacy. So let's acknowledge right now that nobody will be fighting fair. We will hear half-truths, shameless spin, and outright lies coming from all sides.

How to keep your head when all about you are losing theirs? You can start by understanding three myths about health-care reform we're guaranteed to hear repeatedly. Remember them. Whenever you hear one of them, you'll know that someone is trying to mislead you.

Myth no. 1: Rising health-care costs are a problem in themselves.

We've all seen the graph that shows health-care costs increasing much faster than GDP; it's usually presented as evidence of the crisis we're in.

Take a graph with that same trajectory and label it "Sales of hybrid vehicles" or "Downloads from the iTunes Music Store," and nobody proposes government intervention to stop it. Yet health-care costs, too, are in fact revenues, and fast-rising revenues are generally seen as exciting and laudable in every industry except one. How come?

It's because we all sense that in health care we aren't getting our money's worth -- that tons of dollars are wasted. So the problem isn't that we're spending so much, but why.

That distinction is crucial because partisans on all sides will soon be telling us how their plan would slow the rate of spending growth. But slowing spending is easy -- just give people less care.

Instead, make advocates tell how their plan would address the "why" by cutting waste and boosting efficiency. When they do, make sure they don't invoke ...

Myth no. 2: The fee-for-service system is a major part of the problem.

You hear this from both sides: When you pay providers for each service, they have an incentive to sell you more services. Thus, the argument goes, we squander billions on needless MRIs, doctor visits, hospital nights, and so on. The trouble with this reasoning is that we avoid that problem when buying other complex services, from consulting to car repair, on a fee-for-service basis.

The reason we buy loads of unnecessary health-care services is not the fee-for-service system, which we use to buy almost all services. It's that we aren't paying with our own money. Only 12% of U.S. health-care spending is out-of-pocket, a proportion that has been falling for decades.

If each of us controlled more of the money that's being spent on our behalf for health care, we can be certain it would be spent more carefully, on services directly or on insurance that covers those services.

Don't let reform partisans tell you how they'd eliminate fee-for-service; make them tell you how they'd let consumers direct more of their own health-care spending.

Myth no. 3: A well-designed government plan can avoid rationing.

The Obama administration has stated flatly that "health care will not be rationed" under its plan. So let's be clear on this: Health care will be rationed. It must be. To say otherwise is to say the government can supply it in unlimited quantities to everyone.

This point is so obvious it should not be controversial, but the high-voltage word "rationing" seems to blow people's processors. (By the way, health care is rationed in private systems too, but it's done by price, and we don't call it rationing.)

Reform that broadens coverage, improves outcomes, and reduces waste is such an ambitious goal that we may fail to achieve it. The contending forces are so powerful and have so much at stake that I won't attempt to predict the outcome. But we're likely to get something, so we should at least try for reform that isn't based on these myths. That may be asking a lot. To top of page

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