When people were lobbying for the Affordable Care Act (ACA, Obamacare), one of the major arguments in its favor were that health care costs would be reduced. Several reasons were given for this. One was that with preventive care being covered, deadly and expensive diseases would be caught earlier and the cost of treating them would go down.
Examples of this scenario included diabetes which might be controlled better, avoiding many of its serious complications; breast cancer which could be picked up on mammography when it was smaller and had not spread, making cures with surgery and chemotherapy more likely; lung cancer which could be discovered on routine chest x-rays, possibly resulting in a cure; colon cancer which would be found on regular colonoscopy and removed surgically, with chemotherapy if necessary. Coronary artery disease and narrowing of the carotid arteries would also be uncovered at earlier stages, with surgical and/or medical therapy reducing heart attacks and strokes.
All of the above illustrations are valid, but the question remains whether or not they save money for the health care system. They will save lives and improve the quality of life for those patients whose diseases are diagnosed and treated, but this does not necessarily mean that costs will be less. Since people with cancer, diabetes, heart problems, and so forth will be living much longer when their conditions are found and cured or controlled, this means that they will be receiving medical care over a longer period of time than if they had died when younger. Obviously, this is good for the individuals with the illnesses who are healthier and whose survival is extended, but does not help insurance companies, Medicare, and Medicaid, in terms of costs. More tests, more procedures, more office visits, more surgery, and more medications all add up to more money being spent.
For about four to five years, health care costs had seemed to have finally stabilized instead of exceeding the inflation rate by a significant amount. Economists were unsure whether this was some sort of trend or an aberration because of the recession. (People had less money and were unwilling to spend it on health care. And if they had lost their jobs, they often lost their health insurance.) However, actuaries believe that health care spending in 2014 increased by 5.5 percent, with the overall inflation rate below 1 percent. While the jump in health care costs was considerably below the average increases of 9 percent for the thirty years prior to the recession, it may be signaling that the period of low spending growth is over.
There are a number of reasons why the nation can expect higher future health care costs. It was already mentioned that poor people who had had no health insurance will now be living longer and spending more on their own health care through the various health plans. Even people without major illnesses will be spending more- if they have coverage, more preventive tests will be performed with treatment if anything is discovered. And the nation’s population is aging. That alone would raise health care costs given all the conditions common to the elderly. In addition to heart problems, strokes and cancer (all very expensive to treat), there are chronic diseases like arthritis, Alzheimer’s and Parkinson’s (also expensive to treat and long lasting).
Another consideration is that new drugs, particularly those that fight cancer, are increasingly expensive, some running over $100,000 annually. And old drugs, even generics, are having their prices bumped up, as the pharmaceutical companies charge whatever the market will bear. New diagnostic modalities will in all likelihood also have higher price tags.
Thus, though the ACA may be good because it saves lives and increases the quality of many lives, it is unlikely to save money for the nation’s health care system. The Center for Medicare and Medicaid Services, Office of the Actuary, estimated that total health care costs for the United States will be $3.2 trillion in 2015, and $5 trillion by 2022, 20 percent of the GDP. It is unreasonable for America to pay such a high percentage of its GDP on health care when every other developed nation pays much less. These costs, whether borne by industry or the government, make American products less competitive globally.
Between 10 and 20 percent of health care costs go for overhead and administration in a system that is inordinately complex. Approximately 30 percent is spent on unnecessary care, as noted by the Congressional Budget Office in 2008. This includes money spent on extra tests and procedures which make physicians additional income in a fee-for-service type of reimbursement, and in defensive medicine to prevent malpractice suits. Together it means that 40-50 percent of American health care dollars do not go for health care.
A simple single payer system like Medicare is needed to cut overhead and administrative costs, and physicians need to be on salary to eliminate incentives for unnecessary care. Over 30 percent are already salaried, the vast majority satisfied with this method of compensation. In addition, the entire system has to be run by an independent agency like the Federal Reserve to reduce political interference in its functioning. The stakeholders in the health care system may not like it, but to control health care costs, drastic measures need to be taken.
(For those who wish to read further about this subject, my book, Shock Therapy for the American Health Care System is available on Amazon.)
Resurrecting Democracy
www.robertlevinebooks.com
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Political junkie, Vietnam vet, neurologist- three books on aging and dementia. Book on health care reform in 2009- Shock Therapy for the American Health Care System. Book on the need for a centrist third party- Resurrecting Democracy- A Citizen’s Call for a Centrist Third Party published in 2011. Aging Wisely, published in August 2014 by Rowman and Littlefield. Latest book- The Uninformed Voter published May 2020