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?

5 Comments :

Blogger Jay Larson MD said...

Yes, everyone is dithering. Yes, there is plenty of blame and greed to spread around. Until health care costs significantly affects a critical mass of people for fission to occur, change will be slow to occur. I akin our problem to driving a car with 1 gallon of gas. Sure the car seems to be driving fine....until you are 25 miles down the road.

May 17, 2012 at 10:47 AM  
Blogger PCP said...

Things will go along their merry way, until medicare eventually implodes. Then and only then will 'value' in health care emerge to be an issue. I am not being cynical here, I am being 'evidence based'. As long as the payers you describe are in charge, nothing will change, they will continue to kill the solo practice general internist (arguably the best value in health care) and the stakeholders making out well will continue to do so. General internists will continue to go out of practice, to become hospitalists, employed part timers or medical directors or some other such niche.
The federal gov't will continue to pay FQHCs and CHCs cost based reimbursement, Nurse Practitioners at 85% the General Internist rate (eventually at parity probably with the ACPs blessing or at best tepid protest). Private insurance will continue to magnify the glaring disparity created by the specialist stacked RUC. I find it interesting that 28% goes to physicians and 'other clinicians', i wonder what the breakdown is between the two groups, might these 'other clinicians' be the armies of mid level providers and other clinicians such at PTs, PAs, DNPs, ANPs, Podiatrists etc, that now help deliver the wonderful care advocated for by the ACP. Certainly the pipelines of such 'other clinicians' are gushing. So the future is certain as the demand is there too with the 30-40 million new entrants to the health care system.

Sorry bob, I am not bothered. I do feel that the fiscal cliff will come, probably sooner than later, but nonetheless i am not bothered. I feel that only when that crisis emerges will we make decisions based on common sense and not political pandering. As for us PCPs, well we are already on the mat, we have nowhere left to fall. It has to be up from here!

May 17, 2012 at 7:16 PM  
Blogger Harrison said...

It is way too complex for me.
Yes, it costs too much. But it is just money that is being churned within our economy.
And it can in some ways be considered an investment -- because if the health care system works well it keeps people healthier and working and productive.

So it is not good to just grossly think of health care costs as an economic problem.
It is a legitimate part of our economy.
And it is a part of our economy where the market sometimes fails, and where regulations can sometimes create problems.

There are I think too many doctors and other health care professionals worrying about the global picture and looming catastrophe and not paying enough attention to what they can do locally.
Locally we can focus on access and quality.
I think that it is interesting on a more global scale that both of our two major party Presidential candidates are running away from their most important legislative achievements.
Both of them must understand that they used legislation to help overcome a health care problem -- but it wasn't cost. It was access.
Unfortunately we are in a political climate that is narrow mindedly focused on economic issues, and so costs are the concerns.
And nobody wants to be seen as asking for higher taxes, or in effect, more money to pay for the benefits that we have in society.
If you can take steps to over come the problems of access to health care, and therefore manage to help improve the health of our country, then it will most likely cost money. The ACA did this in a way that actually did pretty well as far as the federal budget was concerned.
It is sad to think that the Supreme Court may over turn all or part of that law.
But it is also sad to see the presidential candidates turn their backs on what they accomplished. They are both choosing to follow the rather poisonous mood of the country instead of leading.

The precedents for leading are of course bad.
Jimmy Carter led himself right into a loss to Ronald Reagan.
But in his four years he cut back our country's oil consumption in ways that it took Reagan's whole 8 year to undo.
Lyndon Johnson's record is sullied by his poor choices in Vietnam, but his civil rights and health care achievements were tremendous - but they also left him with almost no hope of winning in 1968 and they led quite predictably to the loss of the entire South for the Democrats in Congress.
And of course the Democrats controlled the South in the first place because of Abraham Lincoln's leadership. And he just barely won re-election and if the South had been voting at the time he would certainly have lost.

Sorry.
We currently have no leaders.
Not enough political money available for anyone to do that.

We just need to focus on making our communities and our surroundings better -- better quality and access.

Take care
Harrison

May 19, 2012 at 12:42 PM  
Blogger Ashton Jones said...

Getting health insurance quotes online are generally easier than dealing with physically finding an agent in person.

July 13, 2012 at 10:34 AM  
Blogger santa said...

Achieving and maintaining health is an ongoing process, shaped by both the evolution of health care knowledge and practices as well as personal strategies and organized interventions for staying healthy. Thanks.
Regards,
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November 3, 2012 at 6:34 AM  

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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.

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