The ACP Advocate Blog
by Bob Doherty
Thursday, May 17, 2012
Health care spending: “The fierce urgency of . . . whenever”
Health care spending is rising at a pace we can’t afford, right? It’s urgent that something be done to reduce it, right? Health care stakeholders and policymakers are tackling the issue with great urgency, right?
Yes, yes, and (emphatically) no! Yes, no one seriously disputes that health care costs are increasing faster than families, taxpayers, and government can afford. And yes, just about everyone pretends that they understand the urgency. But when it comes to actually doing something about it, urgency is replaced with dithering, much like a teenager, who when asked to clean up her room, mutters she’ll get to it “whenever”—while really hoping that someone else will clean up her mess!
But in this case, we can’t count on anyone else to clean up the mess, because it will take all of us. And what a fiscal and economic mess it is:
- Median family incomes increased by only 30% from 1999-2009—just keeping pace with inflation—while the after-tax cost of health insurance increased by a whopping 129%, out-of-pocket expenses increased by 78%, and federal health care spending increased by 140%!
- Mandatory federal health care spending is expected to double over the next decade and increase much faster than the revenue required to support it (one of biggest reasons why our budget deficit and public debt will grow). Higher health care spending is creating a huge and growing income transfer from young to old: a two-earner couple today with average wages over their working years will contribute $119,000 in Medicare payroll taxes while receiving an average of $357,000 in benefits. The difference comes from everyone else who pays into the program.
Where’s the money going? Doctors and hospitals, mostly. In 2010, 34% of private health insurance premiums went to hospitals, 28% to care provided by physicians and other clinicians, 14% to prescription drugs and durable medical equipment, 9% to dental and other professional services, 3% to home health and long-term care, and the remaining 12% was the net cost of insurance (administrative, profits, etc.). Combined, the hospital and physician sectors accounted for 70% of private premium growth over the past five years.
And most of the money is going to pay for health care for a very small group of people. The top one percent of the U.S. population, ranked by spending on health care, accounted for 20 percent of all spending and the top 5 percent accounted for almost half.
Why is spending going up? Rising prices per unit of service, population growth (more users), higher volume of services per user, and a shift to a mix of more expensive services and providers—and, of these, higher prices is the biggest factor.
(My thanks to the National Institute for Health Care Management Foundation, which has put together a superb set of charts that illustrate the above data, and from which I borrowed liberally for this post.)
So if we really understood the urgency, we would give the government and private insurers more authority to drive down prices—such as through negotiation, rate review, competitive bidding, price controls, and/or price transparency and competition.
If we really understood the urgency, we would attack the drivers behind increased intensity/volume: such as by requiring that diagnostic tests demonstrate greater clinical efficacy and lower costs (compared to existing ones) before they’d be covered, educating and training doctors to provide high-value, cost-conscious care, reforming payment models so that clinicians are rewarded for achieving better outcomes and lower costs, reducing duplication in care caused by fragmentation of care, reforming the medical liability system, and making patients more responsible for their own health care and their own costs.
If we really understood the urgency, we would stop screaming at each other about rationing, death panels, and granny being turned out on the street. We would stop blaming everyone else for the problem (you know, it’s always the greedy trial lawyers . . . or greedy doctors . . . or greedy drug companies . . . or greedy insurance companies . . . or wasteful government bureaucrats . . . or demanding patients who don’t take care of themselves. . . surely they’re the ones to blame, not me, not my doctor).
If we really understood the urgency, we would begin to have the difficult but essential public conversation about how much health care we can afford as a country, and how to allocate limited resources more rationally on the health care that society decides matters most based on the best scientific evidence—something that ACP called for a year and a half ago.
In the meantime, as we hide and dither and yell at each other, health spending will grow until it places a stranglehold on our economy, at which point we will have no choice but to address the problem with the fierce urgency it deserves.
Today’s questions: Do you agree that physicians, politicians and the public are dithering about the health care cost problem, rather than treating it with the urgency required? What will it take to get them engaged?
About the Author
Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog
Email Bob Doherty: TheACPAdvocateblog@acponline.org.Follow @BobDohertyACP
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