Healthcare Costs Are Actually Declining
This is not a new article, but the perspective raised by the author is worth revisiting. Enjoy.
Insights by Peter Huber:
"The cost of health care in the U.S. has been declining steadily for the last 50 years. It will decline faster still in the next 50. All of the doleful commentary about mushrooming costs and budget-busting programs ignores the principal economic costs of illness, which are falling fast, and the science of pharmacology, which is transforming the economics of health care.
By far the largest economic cost of illness is lowered labor productivity. Sick people can't work, and when adults die in their prime, they take all their intelligence, skills and initiative with them. Until recently, the cost of illness among children and the elderly was also shouldered mainly by the healthy adults who devoted countless hours to their care. Such costs aren't reflected in revenues to doctors or hospitals, still less in federal insurance programs. They are felt in lost corporate profits, lower wages and, for many women, tireless but entirely off-budget toil in the home.
Several developments radically changed this economic calculus in the second half of the 20th century. Vaccines all but eradicated many of the most common childhood diseases and substantially curbed infectious disease among adults as well. However much it cost to develop the whooping cough vaccine or to distribute it free to families who couldn't afford it, the cost must surely have been dwarfed by the economic gains that came from freeing up mothers to engage in other pursuits. Antibiotics had a comparable impact. Tuberculosis was a fantastically expensive disease a century ago--think of the balconies in the mountains of Davos or New York's Saranac Lake. Polio meant braces and iron lungs. Those costs have all but disappeared.
But while the costs of incapacity, home care and the sanitarium declined, spending on hospitals and physicians rose sharply. Families began outsourcing their health care, particularly for the elderly. This pushed the costs out into the open, where they could be covered by insurance programs and decried by budget experts. The real cost of health care--avoiding disease or recovering from it--certainly continued to drop fast, but now the costs were incurred not in time but in dollars--often government dollars--and that of course changed the debate.
Most of those dollars, however, are still spent buying time--the very expensive time of doctors, nurses, geriatric attendants and countless others who have replaced mom in the business of soothing the fevered brow and changing the bedclothes."
Read the rest...
Peter Huber, a Manhattan Institute senior fellow, is the author of Hard Green: Saving the Environment From the Environmentalists and the Digital Power Report.
Insights by Peter Huber:
"The cost of health care in the U.S. has been declining steadily for the last 50 years. It will decline faster still in the next 50. All of the doleful commentary about mushrooming costs and budget-busting programs ignores the principal economic costs of illness, which are falling fast, and the science of pharmacology, which is transforming the economics of health care.
By far the largest economic cost of illness is lowered labor productivity. Sick people can't work, and when adults die in their prime, they take all their intelligence, skills and initiative with them. Until recently, the cost of illness among children and the elderly was also shouldered mainly by the healthy adults who devoted countless hours to their care. Such costs aren't reflected in revenues to doctors or hospitals, still less in federal insurance programs. They are felt in lost corporate profits, lower wages and, for many women, tireless but entirely off-budget toil in the home.
Several developments radically changed this economic calculus in the second half of the 20th century. Vaccines all but eradicated many of the most common childhood diseases and substantially curbed infectious disease among adults as well. However much it cost to develop the whooping cough vaccine or to distribute it free to families who couldn't afford it, the cost must surely have been dwarfed by the economic gains that came from freeing up mothers to engage in other pursuits. Antibiotics had a comparable impact. Tuberculosis was a fantastically expensive disease a century ago--think of the balconies in the mountains of Davos or New York's Saranac Lake. Polio meant braces and iron lungs. Those costs have all but disappeared.
But while the costs of incapacity, home care and the sanitarium declined, spending on hospitals and physicians rose sharply. Families began outsourcing their health care, particularly for the elderly. This pushed the costs out into the open, where they could be covered by insurance programs and decried by budget experts. The real cost of health care--avoiding disease or recovering from it--certainly continued to drop fast, but now the costs were incurred not in time but in dollars--often government dollars--and that of course changed the debate.
Most of those dollars, however, are still spent buying time--the very expensive time of doctors, nurses, geriatric attendants and countless others who have replaced mom in the business of soothing the fevered brow and changing the bedclothes."
Read the rest...
Peter Huber, a Manhattan Institute senior fellow, is the author of Hard Green: Saving the Environment From the Environmentalists and the Digital Power Report.
Labels: health care crisis
posted by scalpel at 1:30 PM
15 Comments:
what the article talks about is the opportunity cost of not having health care...
the bottom line come 2015 one out of every 5 american dollars will be spent on healthcare.
that is preposterous
Dead people don't spend any health care dollars. But they don't earn any income either.
We are living longer and living better thanks to modern healthcare. A simple gallbladder operation used to mean several days in the hospital and a few weeks off work. Now the surgery is often done on an outpatient basis and people are back to work in a few days. Pneumonia is often no more than an inconvenience now, thanks to our powerful new antibiotics.
How much time does a CEO miss from work after his bypass operation? A week? 50 years ago, he would have retired, if he were lucky enough to survive his MI that is.
Americans spend more on health care than citizens in any other country, but we also produce more wealth than any other country does.
OF course, much of the blame for increasing healthcare costs can be attributed to the high cost of caring for the elderly population, which at first glance would not seem to be cost-effective (as far as increasing GDP). But I posted this article to point out the indirect financial benefits of these expenditures. Besides, unless we are willing to ration elderly care (by active or passive euthanasia), then treating the elderly is simply the right thing to do.
How much should we spend on health care?
I have problems with articles that make outrageous assertions without any citations to back them up. He may be right, but it doesn't jive with common sense. I want to see proof before I'll believe his arguments.
Sorry, but I don't believe this tripe for one minute. Maybe I'm misunderstanding this article, but I see healthcare costs declining because insurance companies are approving fewer procedures and allowing docs less in reimbursements.
Personally, I long for the days when we saw our docs, we paid for the office visit and meds out of our own pocket. Insurance back in those days was used only for the big ticket items like surgery. And, oh joy, the government kept their damn hands out of our healthcare.
OK.
I'll give that to you --
Spending money on regaining your health status will be offset by the streams of income that will result because you are healthy and can earn money.
My beef is with the type of health care spending. Where procedures can be completed at $1000, prices are inflated beacuse the healthcare market does not clear like other economic markets.
Medical costs are inflated beacuse of the inherent information asymmetry in the healthcare system (patients, hospitals and insurers do not have the same information about a procedure). the problems of information asymmetry are exacerbated by an ineffective and grossly inefficient incentive structure that healthcare suppliers operate in.
Why is it that USA is spending far more per capita on healthcare compared to what the British spend? The British incentive structure is more effective. Look up the RAND Health Insurance Experiment and it will show you: its all about incentives.
Also, Japan has some of the worlds highest ratios of people above the age of 65 -- the per capita spending of 65+ japanese citizens is much lower than the 65+ typical medicare beneficiary -- health outcomes are comparable. Japanese have higher life expectancies and higher QALYS, DALYs than Americans.
It's interesting how much Huber's analysis assumes that women will/should perform healthcare as unpaid labor. If the final sentence you quote about soothing the brow expected "dad" to be performing that unpaid labor, it would sound very different, wouldn't it?
Here's what happens in the ER:
You come in with a sprained ankle. Your costs will include an ER physician's evaluation, the ER facility fee, an unnecessary X-ray, the Radiologist's interpretation of that unnecessary X-ray, the application of a splint, crutch training, and a prescription for some pain medication. Your bill will be over $1000, but you will only pay a $100 copay, so you don't mind too much. But you are really paying for all that extra stuff too (with your insurance premiums).
Maybe all you really wanted was some pain medication and some medical advice. If you promise not to sue me, I'll meet you out back, tell you how to treat your injury at home, and write you a prescription for only $25 cash. Would that work?
Let's make it happen somehow.
Anon 11:57 -
50 years ago that's how things worked. Now women are able to work outside the home, partially because of our improvements in healthcare.
Or how about this? You are a 30 year old woman with chest pain. You come into the ER where your evaluation will approach $5000; I will then tell you that your condition is not life-threatening and send you home with some pain pills.
Or, I can see you in a little office with limited overhead and tell you the same thing without running any tests, using only my eyes, ears, and hands, and I will be correct 99 times out of 100. If your family promises not to sue me if I'm wrong, I'll only charge you $100 for my evaluation, and I'll send you home with the same pain pills.
I can reduce your healthcare costs by 95% if you are willing to pay cash and take your chances.
Deal?
Of course, there are many more dimensions to the problem. One of them is that there are more specialized physicians than there are regular physicians. How did that come to be? Why are there very few general practitioners in the United States?
Most regular ailments can be treated by a GP - and those that need additional attention by a specialist.
A study in CA's Stanford Hospital showed that they had more specialists on their payroll than GPs at a regular out patient clinic. (not er but the OPD)
we could drag this ad infinitum ...
i agree that we need to relook the role that the third party (insurance provider) plays, make people more aware of the costs of healh care-- and that insurance is an implicit subsidy on the price of healthcare services therefore, physicians should make cost efficient decisions. the biggest bang for the buck.
have a good one.
In response to scapel's example about the cost of a sprained ankle for an insured patient:
Why would people with insurance even want to go to ER for a minor injury?
The choice to cut our healthcare costs already exists:
When I recently broke my arm (I did not know it was broken, I just knew it hurt, ouch), I could have gone to ER and paid a $200 co-pay. I took the other option: Emergency Clinic where I can list myself online and wait somewhat comfortably at home until they call me and tell me they are ready to see me. I saw a doctor within 10mn of arriving, had an X-ray and was given a splint. My co-pay? $11.00.
I'd rather keep ER trips for really serious stuff. It is cheaper that way.
"Why would people with insurance even want to go to ER for a minor injury?"
Why indeed? But they do it every single day. I had three sprained ankles in my ER at once one day last week. Probably because they think their copay will cover everything, until they find out they haven't met their deductible. Oops!
I like the idea about waiting at home for a callback. That would be hard to enact in a real ER though.
Scalpel...I just couldn't help myself but I linked your "Veggie Tales" again. :)
Sorry -off topic
This comment has been removed by the author.
No one answered scalpel about whether they were willing to accept the risk of him using his clinical judgement in order to save healthcare dollars. This is a key issue. Until the public is willing to cut HealthCare Providers some slack on this issue, MD's ( and RN's, etc.) will continue to practice defensive medicine to protect themselves from occasional "misses" and all of society will have to bear the cost. How many of you are willing to acknowledge that medicine is not a "perfect science" and make the trade off for less certainty to save dollars? Time to "ante up" America, otherwise just shut up and tolerate the current "system".
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