Looking for information on the breakdown of healthcare costs in the U.S., I came across a recent publication by the McKinsey Global Institute (MGI), titled “Accounting for the cost of U.S. health care: A new look at why Americans spend more”. The report contains some statistics and predictions, based on the current trends, which I personally found very alarming. For example, healthcare costs grow at a faster rate than GDP. In 2006, they accounted for 16 percent of GDP, and, according to the Department of Health and Human Services, will post “annual average growth of 6.7 percent over the next decade”. The Congress Budget Office projects that the share of healthcare spending will increase to 25 percent of GDP by 2025.
MGI analyzed healthcare spending patterns in 13 OECD countries and came up with a measure they call “Estimated Spending According to Wealth” (ESAW), which reflects the fact that countries with higher GDP per capita tend to spend larger portion of their GDP on healthcare. But even adjusted for wealth, in 2006, our combined healthcare expenses were $2.1 trillion, or $643 billion above ESAW.
MGI did not find any proof that we get a better value for the extra money we spend. Among the reasons why the current system keeps driving healthcare costs up well above their fair share of GDP, they mention several economic factors, which I interpret as follows:
· Relatively low and flat out-of-pocket expenses for insured patients
· Large number of uninsured Americans (16%). I believe that creates an incentive for providers to pass on un-compensated costs to those, who pay, in the form of higher prices
· Diagnostic procedures and treatment strategy are often chosen on the basis of maximum profitability for the provider
· Lack of statistical data from healthcare institutions, in part, due to patient privacy protection, keeps payers in the dark as to available treatment options for different conditions. They basically pay the asking price, and pass on the buck to their customers, raising premiums later on
It comes at no surprise that ambulatory surgery (ASC) and diagnostic imaging centers (DIC) are two fastest growing areas of healthcare, being extremely profitable. Sometimes, providers may seem obsessed with MRI or CT scan for almost every single encounter, but it also has obvious economic grounds. One of the solutions we could consider is to adopt the law that would require healthcare providers to switch to a CCHIT certified electronic medical record (EMR) system within, say, 3 years. The government should provide grants to public and community clinics and hospitals, delivering care to Medicaid and Medicare recipients, as well as to uninsured or under-insured patients, to assist them with the implementation of such a system. The patient must have the right to get all his or her medical information, collected or created during the encounter, in the electronic form on portable media, free of charge. EMR systems should be able to display that information, regardless of which of them was its origin. Insurance companies, if we keep our multi-payer system intact, or a single payer, whoever it may be, should create incentives for patients to request and share their medical records, by giving discounts or credits/rebates, respectively. The technology to support this already exists in the form of interoperability standards. It just needs to be utilized to stop the medical inflation from getting out of control.
MGI analyzed healthcare spending patterns in 13 OECD countries and came up with a measure they call “Estimated Spending According to Wealth” (ESAW), which reflects the fact that countries with higher GDP per capita tend to spend larger portion of their GDP on healthcare. But even adjusted for wealth, in 2006, our combined healthcare expenses were $2.1 trillion, or $643 billion above ESAW.
MGI did not find any proof that we get a better value for the extra money we spend. Among the reasons why the current system keeps driving healthcare costs up well above their fair share of GDP, they mention several economic factors, which I interpret as follows:
· Relatively low and flat out-of-pocket expenses for insured patients
· Large number of uninsured Americans (16%). I believe that creates an incentive for providers to pass on un-compensated costs to those, who pay, in the form of higher prices
· Diagnostic procedures and treatment strategy are often chosen on the basis of maximum profitability for the provider
· Lack of statistical data from healthcare institutions, in part, due to patient privacy protection, keeps payers in the dark as to available treatment options for different conditions. They basically pay the asking price, and pass on the buck to their customers, raising premiums later on
It comes at no surprise that ambulatory surgery (ASC) and diagnostic imaging centers (DIC) are two fastest growing areas of healthcare, being extremely profitable. Sometimes, providers may seem obsessed with MRI or CT scan for almost every single encounter, but it also has obvious economic grounds. One of the solutions we could consider is to adopt the law that would require healthcare providers to switch to a CCHIT certified electronic medical record (EMR) system within, say, 3 years. The government should provide grants to public and community clinics and hospitals, delivering care to Medicaid and Medicare recipients, as well as to uninsured or under-insured patients, to assist them with the implementation of such a system. The patient must have the right to get all his or her medical information, collected or created during the encounter, in the electronic form on portable media, free of charge. EMR systems should be able to display that information, regardless of which of them was its origin. Insurance companies, if we keep our multi-payer system intact, or a single payer, whoever it may be, should create incentives for patients to request and share their medical records, by giving discounts or credits/rebates, respectively. The technology to support this already exists in the form of interoperability standards. It just needs to be utilized to stop the medical inflation from getting out of control.
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