Health costs absorb one-quarter of economic growth
Boston University School of Public Health
Health Reform Program
February 9, 2005
Health Costs Absorb One-Quarter of Economic Growth, 2000 - 2005
By Alan Sager, Ph.D. and Deborah Socolar, M.P.H.
From the Summary:
The expected $621 billion rise in U.S. health care spending from 2000 to 2005, we find, will consume nearly one-quarter of the nation’s projected economic growth (rise in GDP) of $2,579 billion ($2.6 trillion).
Had health spending in those five years grown only as fast as GDP, the U.S. would have saved $280 billion in 2005 (one-seventh of expected health cost), and $1 trillion in five years. Health spending growth averaged 8.1 percent yearly-more than two-thirds (69 percent) over GDP’s 4.8 percent.
Traditional competitive and regulatory cost controls have failed in health care. The administration urges a new strategy, cost shifting, which it touts as empowering consumers.” By promoting underinsurance, this strategy pushes
patients to deny themselves care. There is no evidence that this is clinically safe or durably contains costs. Patients are the wrong target for cost controls.
The alternative is to engage physicians in marshaling inevitably finite dollars to care for all Americans. Doctors are key to cutting cost because their decisions control 87 percent of personal health spending.
One-half of health spending goes to clinical and administrative waste, excess prices, and theft. Physicians can identify clinical waste. Careful cost controls should rest on physicians’ decisions about services needed by each patient. Pathology is remorseless but resources are finite, so trade-offs are essential. There are no blank checks. Trustworthy methods of paying doctors should minimize incentives to over- or under-serve. Variations on this approach have been called “bedside rationing” or “professionalism within a budget.”
From the report:
When single payer reformers and others design and test payment methods that
doctors understand and accept-and when a political deal between doctors and
payers is successfully negotiated-doctors will urge their patients to vote for reform.
This process of designing and testing of payment methods and related arrangements-seeking trustworthy ways to channel inevitably limited resources to meet a defined population’s health care needs-is a vital stage of reforming health care. To win physicians’ and the public’s confidence, much of that testing will probably have to come before passage of national legislation, rather than after. Indeed, actually enacting single payer legislation may well be one of the later steps in the process of health care reform, not one of the first.
For the links to the press release and the full report:
http://www.bu.edu/dbin/sph/departments/health_services/health_reform.php
The full report:
http://dcc2.bumc.bu.edu/hs/Health%20Costs%20Absorb%20One-Quarter%20of%20Economic%20Growth%20%202000-05%20%20Sager-Socolar%207%20February%202005.pdf
Comment: The report is a melding of highly credible data with “out loud thinking” on the part of the authors. The excerpts listed cover only a few of the concepts discussed in this report. But one of the more important targets for policy discussion is the control that physicians have over health care spending. Policies that improve the physician decision process obviously would be very beneficial.
Because of my own “out loud thinking,” I pulled out from the report the recommendation to design and test newer and better concepts to improve
health care spending and utilization before embarking on the enactment of the single payer model. I would suggest instead that we move forward as fast as possible with single payer reform, but include in the program the flexibility to evaluate and adopt improvements in the physician decision process. There certainly are significant political barriers to reform, but we need to move forward with actions designed to break down those barriers. Strong grassroots advocacy of the most equitable and effective model of reform should move us closer to a just health care system, sooner rather than later.
This informative and appropriately provocative report is well worth downloading.