Who Pays for Climate Change (You do and your children after you)

U.S. Taxpayers Outspend Private Insurers Three-to-One to Cover Climate Disruption Costs

 Natural Resources Defense Council

Sandy Storm Surge

Despite the lengthy debate on the federal budget in Congress, climate change rarely gets mentioned as a deficit driver. Yet paying for climate disruption was one of the largest non-defense discretionary budget items in 2012. Indeed, when all federal spending on last year's droughts, storms, floods, and forest fires are added up, the U.S. Climate Disruption Budget was nearly $100 billion.

The startling reality:

• America's taxpayers paid three times what private insurers paid out to cover losses from extreme weather.
• The federal government spent more taxpayer money on the consequences of 2012 extreme weather than on education or transportation.

Texas Drought

Overall, the insurance industry estimates that 2012 was the second costliest year in U.S. history for climate-related disasters, with more than $139 billion in damages. But private insurers themselves only covered about 25 percent of these costs ($33 billion), leaving the federal government and its public insurance enterprises to pay for the majority of the remaining claims.

In fact, the U.S. government paid more than three times as much as private insurers paid for climate-related disasters in 2012.

Cutting Costs By Addressing Climate Change Now

Fortunately, there is much that the president can do to fight climate change without waiting for the current Congress to act. NRDC has developed a groundbreaking plan to use the Clean Air Act to make big reductions in carbon pollution from power plants, America's largest source of global warming pollution. Our analysis shows that the EPA can set fair and flexible standards that cut power plant carbon pollution by 26 percent by 2020 and 34 percent by 2025 compared to 2005 levels. (Read our roadmap for cutting carbon pollution.)

We don't have to just accept an ever-increasing Climate Disruption Budget that our children will have to pay for. We can fight back with a more forward-looking approach, starting now.
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The Citizens' Climate Lobby has another approach to reducing emissions and creating jobs.

What Now?

Republicans seem to have given up hope of blackmailing the Obama Administration into repealing the Patient Protection and Affordable Care Act (ACA). They're still muddling around trying to figure out what they can wrangle out of the Administration for ending the government shutdown. So, what now?

Well, given that the Republican tactic for repealing/de-funding the ACA have so far failed, they are moving ahead with their parallel effort of undermining it, by stripping out provisions that would save money or bring in revenue (including taxes on high-cost health insurance plans, medical devices, tanning salons, and capital gains and dividends). They will then point to studies that show health care costs rising, and demand repeal all over again. Fanatics don't give up.

The fact is, health care costs in the U.S. are bound to increase initially as millions of people (some 44 million Americans have no health insurance) gain access to health care by virtue of obtaining affordable insurance. This has been born out by the experience in Massachusetts, where near universal health care was instituted in 2006, and the state's costs rose to 15% more per person than the national average (although there's no way to know how much costs might have risen anyway).

It will be difficult to assess the benefits to the economy of a healthy workforce, and fewer visits to the emergency room -- the most expensive way to obtain care. In addition, assessing the cost savings from fewer people having to be hospitalized because they now have routine care will only be possible in the aggregate and then only over the longer term.

Facets of the ACA that attempt to control costs, such as "accountable care organizations" (a system that gives doctors more incentive to better manage their patients' care) and the Independent Payment Review Board (an organization formed to review ways to reduce Medicare costs), were targets of Republican hyperbole, including the infamous reference to "death panels."

In fact, Republicans made all sorts of outlandish, patently false claims about "Obamacare" in their attempts to move the public to act against their own self-interests. They were quite successful in doing this. A recent pole showed that 43% of Americans oppose the law. Interestingly, more oppose "Obamacare," than oppose the Affordable Care Act. Further, more people support provisions of the ACA, such as preventing insurance companies from denying coverage for pre-existing conditions, when they aren't told the provision is part of Obamacare. People are funny about the idea of a black president, especially the people who aren't black.

It is unlikely that a reasoned debate will ever take place in the halls of congress -- not a natural state of affairs in American politics. If it did, one of the questions that might be asked is, "What's a life worth?" How much are we as a society willing to spend to improve a fellow citizen's quality and/or length of life? Take HIV as an example. Antiretroviral (ARV) treatment has transformed HIV from a death sentence to a chronic condition, allowing people with HIV to live longer and healthier lives (Linnemayr, et al, RAND 2012). But highly active ARV drugs are expensive, about $15,000 per year per patient (an examination of why ARV drugs are so expensive is beyond the scope of this essay, but suffice it to say, "free market economics" is not part of the equation). Before the development of ARV drugs (the first was developed in 1987), treating HIV was cheap -- you got HIV, then AIDS, then you died.

Washington policy makers aren't thrilled by the relatively inexpensive cost of saving the life of an HIV patient, they're outraged by the cost of Antiretroviral Therapy (ART). Thus, the debate centers on whether ART should be covered under Medicare, or Medicaid, or Social Security for people on disability (SSI / SSDI). Currently, fewer than one in five (17%) people living with HIV has private insurance and nearly 30% do not have any coverage. This will change dramatically under the Affordable Care Act, and many on the right (especially the religious right) see this as another reason to oppose ACA.

A critic of the Affordable Care Act, who worked on George W. Bush's health care proposals, Phillip Swagel, wrote recently that, "The goals of the Affordable Care Act are laudable. But achieving them will require an honest assessment of both successes and problems, and a willingness to make adjustments going forward." Swagel does not see President Obama as willing to make such an assessment.

I think Swagel is right on the first count, adjustments going forward, and wrong on the second. It's the TEA Party coalition in the Republican Party, and by extension, the party itself, that won't be willing to make an honest assessment of the ACA and will instead do everything in their power to either kill it or cause it to fail. Why? Because they prize their ideology over the health of millions of Americans.

What's Driving Health Care Costs?

In 1973 in France, French tax inspectors barged into the offices of the 155 year-old Cruse et Fils Freres wine shippers and discovered that the shippers were passing off inferior wines from humble growing regions as superior wines from regions like the noble Bordeaux. One vat of exceptionally bad wine was labeled, "Salable to Americans as Beaujolais."

In testimony before the Senate Committee on the Budget in January 2008, the Congressional Budget Office stated that "future health care spending is the single most important factor determining the nation’s long-term fiscal condition." Given its importance, Americans would do well to understand what's driving burgeoning health care costs and what can reasonably be done about it -- we don't want to spend a lot of money buying bad wine.

The chart above shows where the health care dollar goes, but not necessarily where we can get the most bang for buck in slowing the rise in health care spending.

Some people argue that the rise in America's health care spending is due to an aging population. But it turns out that the bulk of the projected increase in spending on Medicare is not due to demographic changes (e.g., increases in the number of beneficiaries) but rather to on-going increases in costs per beneficiary. In other words, we're spending more on our seniors that we did in the past. Why?

The reason for this is the same reason we're spending more generally on health care -- we have more high technology and better medicine and we dispense it more readily. According to the CBO, “The most important factor driving the long-term growth of health care costs has been the emergence, adoption, and widespread diffusion of new medical technologies and services by the U.S. health care system.”

The problem is exacerbated (if you want to look at it that way) by the fact that Americans are better informed about available medical technology (god bless the Internet and TV) and more aggressive in requesting it from their doctor. If they aren't already asking for the latest drug to reduce their anxieties, they're told to do so by pharmaceutical company advertising, "Ask you doctor about Zofloat, today." Prescription drugs cost, on average, 30% to 50% more in the United States than in Europe. Under most of the health care bills under consideration in the House and Senate, the secretary of health and human services would be required to negotiate drug prices on behalf of Medicare beneficiaries, a proposal that is anathema to pharmaceutical companies.

Another major factor in rising health care costs -- perhaps the most significant -- is the nexus between how doctors are paid and the cost of high tech medical procedures, such as the myocardial perfusion nuclear stress test, a procedure I had recently. I don't have my bill yet, but tests like this can easily run over $1000.

In the United States, nearly all doctors are paid piecemeal, for each test or procedure they perform, rather than a flat salary. As a result, physicians have financial incentives to perform procedures that further drive up overall health care spending. Doctors in the United States earn two to three times as much as they do in other industrialized countries. Furthermore, doctors have become much more business savvy, and like other businesses are realizing the financial benefits of vertical integration. Why “outsource” lab work when you can open your own lab and supply it a ready source of customers – your patients?

Americans generally don't begrudge doctors their high financial returns. It takes intelligence and hard work to become a doctor, to say nothing of the cost of medical school and setting up business (in fact, most new doctors start their profession in considerable debt). I don't have an opinion on whether doctors make too much money or not, but I do believe that a system that is designed to provide financial incentives to doctors to perform procedures rather than care for patients' well-being is a poorly conceived system.

It should also be noted that doctors make more from doing expensive, complex procedures. These procedures require specialists. Thus, an unintended consequence of our health care system is the over abundance of medical specialists and the growing shortage of primary care physicians.

Finally, the spectre of multimillion-dollar malpractice suits is a further incentive for doctors to practice "defensive medicine" and order expensive and often unnecessary tests.

Is it time to convert doctor's pay to a salary system? Many people think so. Most doctors don't.