Exploding Health Care Costs: How Long Can We Keep Up?
"Well, in our country," said Alice, still panting a little, "you'd generally get to somewhere else - if you run very fast for a long time, as we've been doing."
"A slow sort of country!" said the Queen. "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"
Lewis Carroll, Through the Looking Glass
Twenty three years ago, a physician friend with over two decades of clinical practice, left practice, switching to managed care. Within a couple of years when he noted the ballooning costs of insurance payments resulting from rising charges by physicians and hospitals, he and some of his associates, started using the term "unsustainable expenditures." That was back in 1986. Mark recently reminded me of his subsequent experiences as a principal medical at several HMOs and insurance companies as we discussed currently escalating health care costs. It seems not much has changed. According to statistics, these costs indeed still seem to be "unsustainable" as these expenditures continue to rise into the stratosphere.
Big Bad Numbers
By several measures, health care spending continues to increase at the fastest rate in our history. "Medical causes" were cited by about half of bankruptcy filers in the United States in 2001 while 100,000 families lurch into bankruptcy each year resulting from the cost of treating cancer. Here are some scary numbers to consider:
Expenditures in the United States on health care, surpassed $2.3 trillion in 2007, or over $7400 per person, more than three times the $714 billion spent in 1990. Four key factors, according to this study, are driving up health care costs: "intensity" of service, costs of prescription drugs and technology, aging of the population, and administrative costs. The latter accounts for 7% of overall expense, much of which comes from billing and marketing. Contrast this with 2% administrative costs for the Medicare program.
Total health care costs grew at an annual rate of 6.7 percent in 2006, yielding $8.4 trillion expenditures in 20 years. If this historical trend continues, U.S. health care spending is projected to reach 20% of GDP by 2016. While our legislators and economists are attempting vigorously to choose whom to bail out or nationalize next in our huge economy, they are also trying desperately to figure out how to pay our doctor, drug, and hospital bills. So far the Administration and the legislators are tackling stupendous problems, but the nation remains hopeful and confident in our leadership, especially with their deep commitment to improved financing and availability of health care.
How does our Health Care Rank Internationally?
According to the National Academy of Sciences the U.S. is the only wealthy industrialized nation that does not have some type of universal health care (a single payer or compulsory health insurance). Americans without health insurance coverage during 2007 totaled 47 million people. The World Health Organization (WHO) in 2004 ranked the U.S. health care system as the highest in cost, among the top ten highest spenders among United Nations member countries. While health care spending accounted for 16% of the GDP in the U.S., it amounted to 30%-50% less in Switzerland, Germany, Canada, France, Great Britain, and Holland according to the Organization for Economic Cooperation and Development. Although the U.S. was judged first in responsiveness, we were 37th in overall performance and 72nd by overall level of health among 191 member nations included in the study! For more on how we compare with other countries, see here and here.
How Much are we Really Getting Shortchanged?
Today, with the world financial markets in chaos, banking and industries on life support, collapsing economic activity, rapidly rising unemployment, health care in the U.S. remains near the top of the critical list. While we have the most expensive health system in the world, we consistently underperform in additional areas relative to other countries. Recent studies by the Commonwealth Fund conclude that "The United States stands out as the only nation in these studies that does not ensure access to health care through universal coverage," said Commonwealth Fund president Karen Davis. In Mirror, Mirror on the Wall an extensive comparative study focused on interviews with physicians and patients in Australia, Britain, Canada, Germany, New Zealand and the United States. Subjects were asked to speak about their experiences and views on their health systems. The US ranked last in most areas, including access to health care, patient safety, timeliness of care, efficiency and equity. Americans were also last in percentage having a regular physician. "The US spends twice what the average industrialized country spends on health care but we're clearly not getting value for the money," Davis told AFP news.
The study, "Multinational Comparisons of Health Systems Data," found that even though the US spends the most on publicly and privately financed health insurance, its citizens had the most potential years of life lost due to circulatory and respiratory diseases as well as diabetes. "This study blows a lot of myths about the US health system," Davis said. "We spend three times what the average country spends on a day of hospital care and we also spend twice what the average country spends on prescription medication."
The United States spends six times more per capita on the administration of the health care system than its peer Western European nations.
Martin F. Sturman, MD, FACP
Copyright 2009, Mathemedics, Inc.
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