A balanced healthcare system is supported by three legs: quality of care, access to care and cost of care. Balancing cost, quality and access is tricky as they are all interrelated. Increase or reduce one and it affects the others. For example, it's very difficult to lower costs without reducing access or quality. Increase access, and you will increase cost or lower quality.

In the United States, the first two legs are in relatively good condition. It's the third one-cost-that is threatening to collapse. Right now, as the healthcare reform debate thunders on, the system seems ready for the critical list. Even if Congress does enact a new law, it seems that the same old problems will remain, at least for the next few years. So let's take a careful look at what's at stake.

An October 2006 poll by the Kaiser Family Foundation, ABC News and USA Today found that 89% of Americans were satisfied with their own personal medical care. The independent polling company Rasmussen Reports reported this year that 49% of Americans rate their current healthcare as good or excellent, while just 27% say the U.S. healthcare system is poor.

There seems to be good evidence that the quality of our healthcare system is high. For example, according to a Times of London article from July 15, 2009, the survival rate for prostate cancer is 92% in the U.S., compared with 57% in Britain. According to the Daily Mail (February 9, 2010), an American woman has a 97% chance of remaining alive for at least five years after a breast cancer diagnosis, while in Britain, only 78% survive that long.

Since most Americans appear to be satisfied with their access and quality of care, it's curious why 40% of voters nationwide, a significant minority, favor the proposed healthcare reforms passed by the House and Senate (Rasmussen Reports). Perhaps it's because most Americans inherently understand the general principle that when you increase access (healthcare for all Americans and no filters on preexisting conditions), costs will rise or quality will decrease-or both. Rasmussen reported last January that 78% of Americans expect the plan to cost more than projected, stating, "Voters overwhelmingly believe passage of the plan will increase the federal deficit and lead to middle-class tax hikes."

RUNAWAY COSTS

So it would appear that the major healthcare issue in this country is one of cost. According to recent projections reported in the Wall Street Journal, by 2020 about one in five dollars spent in the U.S. will go to healthcare. This is far more than in any other industrialized nation. This in turn limits access and affects the quality of care that people actually receive.

So how do we cut back? While abuses in Medicare are legendary (some experts estimate that Medicaid abuse eats up at least 10% of the program's total cost), we won't solve this problem simply by squeezing abuses out of the system, forcing medical and drug companies to lower prices or cutting doctors' pay. Many experts see no way to lower healthcare expenses substantially without restricting access or reducing quality. This is a huge obstacle to reform as we Americans have become accustomed to a high level of care.

When I explain to my clients that one way to lower healthcare costs is to reduce or minimize care, especially for the elderly, it doesn't go over well. Neither do they want to give up their access to the latest medical developments.

The challenge of any healthcare reform plan is to find ways to use those medical developments wisely, maintaining high quality while increasing access to care and decreasing costs. The fact that healthcare reform is stalled in Congress (at least it was when this issue went to press) gives us an opportunity to have a more thoughtful nationwide conversation about what kind of healthcare we want-and how much we are willing to pay for it. The financial planning profession should have a seat at the table in that discussion. Decisions made in Washington will profoundly affect us-and our clients.

PROBLEMS WITH THE SYSTEM

Many factors contribute to high healthcare costs. Hospital administrators and physicians observe that low Medicare and insurance reimbursements encourage medical providers to inflate prices to private (that is, uninsured) payers. Overregulation by government increases administrative costs, decreases competition and increases insurance costs, owing to such requirements as forbidding health insurance companies to compete across state lines. Here are some of the major systemic problems.

Lack of transparency. The lack of generally accepted standards of care and of limits on malpractice awards lead to high costs for malpractice insurance-as well as encouraging doctors to practice defensive medicine by ordering unnecessary tests. In addition, our system of payment for treatments, rather than outcomes, encourages extra tests and procedures. Our system of third-party payments reduces the incentive for both doctors and patients to control or even discuss costs. Do you know the price for, oh, a chest X-ray at various hospitals in your area? Medical care is the only thing we buy without comparison shopping or even knowing the estimated cost in advance.