Senior Partner David Osborne has authored a new paper about one of governments' biggest challenges: health care reform. Read on for a reinventor's take on how to tackle it.
Consider the plight of Governor X. Elected in 2006, he promised during his campaign to increase spending on public education, transportation, and local aid, while expanding the number of citizens who had health insurance. Within a month of his election, the outgoing budget director informed him of a harsh truth: there would be little new money to accomplish these worthy goals. The rising cost of health care would devour most new revenue.
Virtually every governor and many mayors and city and county managers find themselves in some version of this situation, particularly now that the Governmental Accounting Standards Board requires them to report their health insurance obligations to retirees.
Health care is bankrupting America. Since 1960, costs have accelerated 10 percent a year—doubling every 7.5 years. We spend 16 percent of our gross domestic product on health care, almost double the European average, yet the World Health Organization ranks the U.S. 37th in the world for the overall quality of its health care system. Large American firms are at a competitive disadvantage because they spend so much more on health care than their foreign competitors.
But the fiscal squeeze is particularly debilitating in the public sector. By 2005 state and local governments spent 21 percent of their money on health, almost double the figure from 1972. Where did the money come from? Education, down from 39 to 32 percent; human services, down from 11 to 8 percent; and transportation, down from 8.7 to 5.5 percent. (See Figure 1.) Click to continue
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