"Bending the Curve": What Really Drives Health Care Spending
A major source of these spending increases is a third-party payment system that often leaves the physician and patient insulated from and even unaware of the costs of the various treatment options. Often, the patient faces the same co-payment regardless of which treatment is chosen, and the extra costs are passed along to the insurance company, Medicare, or Medicaid. These payers may appear to have an incentive to encourage efficient use of resources, but ultimately they do not pay the price for inefficiency. Insurance companies offer "generous" benefits and pass on the increased spending to patients (and often their co-workers) through increased insurance premiums, and government programs pass on the spending increases to taxpayers.
To a large extent, increased health care spending is a consequence of this third-party payment system. In recent decades, the percentage of health care spending paid "out of pocket" by patients has fallen substantially, from 52 percent in 1965 to only 15 percent in 2005, which means that third-party payments have increased from 48 percent to 85 percent. As third-party payer spending has risen as a percentage, total spending has grown even faster. Since 1965, real per capita health care expenditures have increased approximately sixfold.[47]
In short, neither the patient, the doctor, the insurance company, nor any government program has much incentive to spend health care dollars efficiently. A system that determines prices through administrative procedures rather than market processes disconnects the prices paid for health care services and products from both the costs incurred to provide them and their value to patients. A tax code that rewards employees who purchase insurance through their jobs and punishes individuals who purchase health insurance in the outside market further distorts these incentives. A litigious tort system that encourages doctors to order unnecessary tests and procedures at no cost to themselves in order to forestall lawsuits exacerbates the problem. However, the main problem is a system that insulates both patients and producers from normal market incentives to reduce prices and spending.
While I might agree with the entire analysis presented in this long and erudite analysis of health care costs, the authors echo a common belief in the medical blogosphere. The current payment system encourages increased spending. We are getting exactly what our system design would predict.
I wish we could have nationally available health insurance plans without state mandates. We could have competition through a system of transparent definitions. Workers could decide the level of health care they want to buy.
I understand all the arguments against this approach. I suspect some of my friends will bring out the health care is a right argument. I will argue that food and shelter are rights, but everyone does not eat the same food or live in the same space.
There are challenges in developing a system that encourages workers to make rational decisions about their insurance. I believe that we could do this, but the Democrats will never pass a bill to allow this.
Please read as much of this article as you can. It is thoughtful, referenced and thought provoking.
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The writers seem to think that people would be capable of directing their own medical spending and sorting out what is standard/necessary verses what is extra/maybe-not-necessary via HSA accounts. As if they could make decisions about what is needed and what isn’t on their own!
I sense this is a major difference between this more conservative view and a liberal view.
I do have to wonder how many people would choose a new car over medical services if they had the option.
Having worked as an office manager for a surgeon, I am very aware of medical malpractice costs and they are very very high. The first two months or so of each doctor’s year are spent earning to pay those costs. My sister had a workman comp suit for a workplace injury and also was in a serious car accident. She was left with barely enough proceeds after each to pay her vast medical expenses as the greedy attorneys take ONE THIRD of these cases. I think Congress should put a cap on the percentage that these vultures can charge. ONE THIRD is extortion. True, they often take the case and only get paid if they win, therefore take the risk, but I still think that there has to be a better way. They make more money than doctors, don’t work half as hard or have nearly the magnitude of a job. Why aren’t we talking about reforming their profession’s complete cost structure and way of doing business???? I am sure many doctors would agree. Even laypeople like me can see the inequity in this. It is this kind of thing that breeds the distrust and disdain of and for most members of Congress and politicians in general.
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