Increased Spending On Health Care: Long-Term Implications For The Nation

By Michael E. Chernew, Richard A. Hirth and David M. Cutler
Health Affairs
September/October 2009
This paper updates one we published in 2003, describing the implications of continued health care spending growth for the consumption of nonhealth goods and services. Our estimates now show that at approximately long-run average rates of excess health spending growth, 119 percent of the real increase in per capita income would be devoted to health spending over the 2007–2083 projection period. We argue that an alternative scenario, under which health spending grew just one percentage point faster than real per capita income, is “affordable,” although 53.6 percent of real income growth over the period would go to health care. Moreover, even with the more favorable assumption, the nation would still face important challenges paying for care and dividing up the burden. This analysis thus supports the argument that reforms that would dramatically slow the rate of health care spending growth are necessary, especially if the nation hopes to maintain a reasonable amount of consumption of nonhealth goods and services.
… as in our earlier work, we did not capture distributional effects. The impact of health spending growth will likely be more onerous on economically disadvantaged individuals and families who do not qualify for public subsidies.
http://content.healthaffairs.org/cgi/content/abstract/28/5/1253

Average-income Americans – the majority of us – are finding the impact of health spending growth to be onerous, and it will get worse.
President Obama has said that controlling the growth in health care costs is essential if we expect to provide everyone with affordable access to health care. Listen carefully to the president this evening as he addresses the joint session of Congress, and try to identify the specific proposals that will have a significant impact on slowing the rate of cost increases. Be sure to distinguish between sound bites and sound policy.
Unfortunately, the model of reform that the administration and Congress has selected – building on our existing multi-payer public and private systems – is the most expensive model ever devised, and will result in a continuation of excessive cost increases. The only effective measure under consideration to slow the growth will be the increased financial burden placed on individuals which will cause them to forgo necessary care. That is the worst possible choice amongst cost containment policies.
An improved Medicare for all would be the most effective model for slowing the increase in health care costs. And because it’s both automatic in enrollment and equitable in its financing, it would ensure that everyone would have affordable access to health care. The model described tonight, though more expensive, will fall short on these goals.
The September/October issue of Health Affairs is a thematic volume on “Bending the Cost Curve.” If you glance at the webpage at this link, you will understand why this issue is silent on a single payer national health program (and pause for a moment of silence over the demise of the credibility of Health Affairs):
http://www.bendingthecostcurve.com/

By Michael E. Chernew, Richard A. Hirth and David M. Cutler
Health Affairs
September/October 2009

This paper updates one we published in 2003, describing the implications of continued health care spending growth for the consumption of nonhealth goods and services. Our estimates now show that at approximately long-run average rates of excess health spending growth, 119 percent of the real increase in per capita income would be devoted to health spending over the 2007–2083 projection period. We argue that an alternative scenario, under which health spending grew just one percentage point faster than real per capita income, is “affordable,” although 53.6 percent of real income growth over the period would go to health care. Moreover, even with the more favorable assumption, the nation would still face important challenges paying for care and dividing up the burden. This analysis thus supports the argument that reforms that would dramatically slow the rate of health care spending growth are necessary, especially if the nation hopes to maintain a reasonable amount of consumption of nonhealth goods and services.

… as in our earlier work, we did not capture distributional effects. The impact of health spending growth will likely be more onerous on economically disadvantaged individuals and families who do not qualify for public subsidies.

http://content.healthaffairs.org/cgi/content/abstract/28/5/1253

Comment:

By Don McCanne, MD

Average-income Americans – the majority of us – are finding the impact of health spending growth to be onerous, and it will get worse.

President Obama has said that controlling the growth in health care costs is essential if we expect to provide everyone with affordable access to health care. Listen carefully to the president this evening as he addresses the joint session of Congress, and try to identify the specific proposals that will have a significant impact on slowing the rate of cost increases. Be sure to distinguish between sound bites and sound policy.

Unfortunately, the model of reform that the administration and Congress has selected – building on our existing multi-payer public and private systems – is the most expensive model ever devised, and will result in a continuation of excessive cost increases. The only effective measure under consideration to slow the growth will be the increased financial burden placed on individuals which will cause them to forgo necessary care. That is the worst possible choice amongst cost containment policies.

An improved Medicare for all would be the most effective model for slowing the increase in health care costs. And because it’s both automatic in enrollment and equitable in its financing, it would ensure that everyone would have affordable access to health care. The model described tonight, though more expensive, will fall short on these goals.

The September/October issue of Health Affairs is a thematic volume on “Bending the Cost Curve.” If you glance at the webpage at this link, you will understand why this issue is silent on a single payer national health program (and pause for a moment of silence over the demise of the credibility of Health Affairs):
http://www.bendingthecostcurve.com/