CMS report on health spending increases
Health Affairs
January/February 2004
Health Spending Rebound Continues In 2002
By Katharine Levit (and colleagues from the Office of the Actuary, Centers for Medicare and Medicaid Services)
U.S. health care spending climbed to $1.6 trillion in 2002, or $5,440 per person. Health spending rose 8.5 percent in 2001 and 9.3 percent in 2002, contributing to a spike of 1.6 percentage points in the health share of across domestic product (GDP) since 2000 (to 14.9% in 2002).
The continued acceleration in health care spending growth has posed financial challenges for government, businesses, and individuals alike. Compared with economic growth of 3.6 percent, growth in health spending of 9.3 percent pressures employers to cut other spending increases, possibly through reducing jobs, wage gains, or health benefits or through Shifting more costs to employees. State and federal governments face the same dilemma of costs rising more rapidly than revenues, leading every state to scrutinize discretionary Medicaid benefits as the number eligible for coverage continues to grow.
Factors fueling growth in health spending are already showing signs of dissipating in 2003. Preliminary data indicate that hospital use has eased and that wage growth in the health sector has decelerated slightly. Furthermore, Medicare givebacks have expired, and states have begun plans to curtail Medicaid spending growth. Finally, as consumers share more of the increases in cost, the value of health services will be more closely weighed against other purchases, underscoring the considerable value of some services and the discretionary nature of others.
http://content.healthaffairs.org/cgi/content/full/23/1/147
Comment: Can the health care consumer really distinguish between services that are of considerable value and those that are more discretionary? In a life-threatening emergency, services are rendered without significant consumer input, even though the financial consequences for the patient may be severe.
But what about decisions regarding management of serious chronic disorders such as diabetes, hypertension, congestive heart failure, or hyperlipidemia? For the great multitude of individuals who have negligible disposable income, the consumer decisions become a choice of essentials such as housing and food, versus adequately managing a disorder that may have minimal symptoms at present, but, in time, may have a major detrimental impact on the individual’s health status. The health care consumer may perceive these expenses to be discretionary, when, in reality, reducing spending now may result in disability and premature death. No truly humane policymaker for health care provider can ever consider these expenses to be being discretionary.
Perhaps the most common example of an “unnecessary” discretionary service is the C-T or MRI scan “demanded” by the patient. Even though medical decisions are ultimately made by the patient, it is the responsibility for the physician to see that the patient’s decision is an informed one. If the scan is unnecessary, the physician has an obligation to inform the patient of that fact in explaining why he or she is not ordering it. Sometimes the claim is made that a scan may be necessary to “prevent a lawsuit.” But if the patient’s symptoms indicate that a scan could detect a problem that might have adverse consequences, then it is an indicated test. But if the test is clearly not indicated, that alone is adequate evidence to defend against accusations of malpractice for not ordering the test. It is the physician’s obligation to avoid wasting resources on services that are not indicated.
Nevertheless, excessive discretionary services are a problem. But they are related to excess capacity and to a dependence on use of specialized services for problems that would be more appropriately provided on a primary care level. Rather than being left to a flawed decision process of patient-consumers, reduction of this waste will need to be made by comprehensive planning decisions, both controlling capacity and allocating our resources appropriately, thereby ensuring an adequate primary care Base with an appropriate level of high-tech care.
The other important method of improving spending is to eliminate the profound administrative waste by reforming our method of funding care. We need structural reform that will improve health care spending, rather than consumer-directed financial barriers to necessary services.
Reducing spending on essential health services through policies that create the deception that these costs are “discretionary,” and unaffordable anyway, is simply inhumane.