I wrote a post a little while back explaining that there are two types of healthcare costs: care costs and non-care costs. Well, taking a step back, those are actually both related only to our level of spending. But there is another aspect of spending that is not talked about nearly as much, and about which I am much more concerned: trend.
The U.S. Department of Labor keeps track of the U.S. inflation rate, and they say it has been under 4 percent every year since 1991. Estimates of yearly health spending growth range from 5 to 15 percent, but most come in over the 10 percent mark. If you’ve done your math correctly, you probably figured out that healthcare spending is increasing faster than inflation.
So, is this bad? Well, as a country, we’re getting wealthier, and with more wealth comes more health spending, which is a great thing. There are tons of things that people choose to get healthcare-wise when they have more money. Maybe it’s plastic surgery, maybe it’s other cosmetic surgeries, maybe it’s eye surgery, maybe it’s weight-loss surgery, maybe it’s the more expensive treatment option for longtime joint or back pain, . . . you get the picture.
So yes, some spending increases are a good sign. But that crazy spending growth can’t all be attributed to wealth increases in our country. Two other big causes of spending growth can probably be labeled as (1) medical technology and (2) chronic diseases, and both of these are causing me some concern. First, a little explanation of each.
Medical technology causes spending growth because it allows us to spend tons of money saving someone or fixing someone when we used to have to just watch from the sidelines. It also allows us to treat things more effectively and more expensively. For example, a robot for use in surgeries is super expensive, but it reduces invasiveness and increases the range of things that are considered operable. These are positive things as well.
And as for chronic diseases, this refers to kidney disease, heart disease, diabetes, those sorts of things. And some estimates say that two thirds of our healthcare expenditures are generated by them. Crazy, I know.
So there’s a basic overview of why healthcare costs are increasing faster than our economy is growing. And here is why I’m concerned about it: it’s pricing low-income Americans out of healthcare insurance and contributing to a growing national debt.
As insurance companies have to deal with more expensive beneficiaries (especially the ones with chronic diseases), they have to raise insurance rates. And as new (more expensive) treatment options become available, they have to cover many of those (or risk losing beneficiaries), which means (again) raising insurance rates. All of this raising insurance rates business means it gets too expensive for people and employers, so they just make the decision to just get rid of health insurance and hope for the best.
And then there’s the government debt. Medicare and Medicaid are not immune to all the insurance cost increases. Yeah, they get to decide how much they pay providers, but they still have to decide what to do about new expensive treatments, and they also have to fork out more dough for people with chronic diseases, especially since the over-65 population is the main chronic-disease population. It’s just getting more expensive for the government to pay for healthcare!
So there you have it. Our spending trend is causing some major problems, and it is definitely exacerbating our quality and access problems. But never fear! There are some amazingly good solutions out there for all of this, but I’ll save those for another post, same bat time, same bat channel.