Getting to GDP+1
I am envious of my colleagues on this site who have the relatively easy job of describing the pressing need to achieve universal coverage in the United States and discussing approaches to achieving that goal. I characterize their job as relatively easy, although the failure to date to accomplish this goal speaks volumes to the difficulties. The problems in achieving universal coverage are primarily political. With the exception of Massachusetts (which financed coverage primarily with federal dollars), we have yet to assemble 51% of a legislature to vote for getting almost everyone covered, although we came close in Sacramento in 2007, and many of us have high hopes for action in Washington DC this year.
In contrast to the story on coverage, the problems in figuring out how to reduce the rate of growth in health spending are both technical and political. There is fairly wide agreement that health spending growth needs to be reduced. Over the past 40 years, health expenditures have increased at approximately 2.4% per year faster than the rate of growth of the Gross Domestic Product (that is, at GDP+2.4). If health expenditures were to continue to increase at GDP+2.4, the fraction of our income that is devoted to health care would double over the next 30 years – from approximately 16.5% in 2008 to over 33% in 2037. Some might argue that we can afford to spend that much of our income on health care, but it is impossible for me to imagine either the public or private sector financing arrangements that could support that level of spending.
Currently, the federal and state (and, to a minor extent, local) governments pay about one-half of the nation’s health bill – approximately 8% of GDP. If the 50-50 ratio of public to private spending were to remain constant, an increase in health spending to 33% of GDP would require an increase in tax revenues of about 8% of GDP to support it. This would be possible only if we were willing to elect politicians who pledged: ‘Spending on health care is very important, and I promise that if you elect me I will work hard to continually increase your taxes as long as you are alive to support this valuable public function.’ The political landscape has changed a lot in the past year, but I don’t think a politician could win on that platform.
And rapid health expenditure increases on the private side are no more sustainable than in the public sector. The average family health insurance premium in California in 2008 for employer-sponsored insurance was approximately $13,000. That amount is already unaffordable for a large number of moderate-income families. At GDP+2.4, that premium will approximately double (in today’s dollars) over the next 30 years, making health insurance, and most health care, unaffordable for the majority of workers and their families.
Health expenditures have been increasing more quickly than the rest of the economy primarily because of the rapid adoption and diffusion of new technology. Slowing health expenditure growth requires, in the medium to long term, some slowdown in the rate of diffusion of new technology. That is a potentially scary prospect, raising the specter that slower health expenditure growth will deny us the health benefits that we might achieve if we let technology diffuse more rapidly. The reassuring news is that most countries in Europe have diffused technology somewhat more slowly than we have in the US, have had somewhat slower growth in health expenditures over the past 40 years than we have in the US, but have achieved greater gains in life expectancy and larger reductions in infant mortality than we have in the US. If done halfway intelligently, we should be able to slow health expenditure and technology growth while continuing to enjoy gains in quality and quantity of life.
While there is widespread agreement that something must be done to move us closer to GDP+1, there is almost no serious discussion of ideas that would get us there. The strategies commonly mentioned as methods for reducing expenditure growth – investment in health information technology; investment in comparative effectiveness research, investment in health promotion and disease prevention; greater implementation of pay for performance; greater transparency in pricing; increased use of disease management and high cost case management; establishment of medical homes; reduction in administrative costs; and malpractice reform — may be good ideas and might well lead to improvements in quality and efficiency, but are not likely, by themselves, to substantially slow the adoption or diffusion of new technology, or to move us much closer to GDP+1. I will discuss in my next post some of the ideas that might actually move us towards GDP+1.
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2 Responses to “Getting to GDP+1”
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I wonder about the accuracy of your numbers and analysis, since the first fact you offer in inaccurate and you fail to call out the most egregious health care cost center.
SB840, California Senator Sheila Kuehl’s single payer health care bill, was twice approved by both houses of the CA legislature, but vetoed by the Governor. In its current form, SB 810 is supported by doctors, nurses, unions, and a majority of voters. Electing a governor committed to single payer health care is a primary goal of the next election.
For profit health insurance, an egregious cost center, provides not one whit of health care. Its sole function is to cherry pick the healthy so as to bolster company profits, while consigning the remainder of the population to taxpayer funded programs or to no health care at all. It’s share of the health care bill has been rising year by year, skimming between 15% and 50% from actual health care to administration and profits. Contrast that with Medicare’s overhead of 3-5%.
The trail of numbers in this post confuse, rather than clarify, the argument, when single payer, the most cost effective and socially constructive option, is excluded from the discussion.
Reaching GDP+1 is very easy to do, when you consider that our current Symptom Diagnosis model of health care is ineffective against chronic diseases, since by the time symptoms emerge, 20 years of full-body damage has already occured, caused by poor lifestyle choices.
The cultural taboo against insisting on personal lifestyle change is a hold-over from 20th century thinking, and will melt away as early adopters realize that genetic expression works equally for infectious diseases and chronic diseases.
My site, freehealthreform.com , explains the almost zero cost of changing from the present model, effective against only 15% of health costs, to a Lifestyle Diagnosis model, effective against almost 100% of health costs.
So, the sky is not falling on those willing to exert a little effort towards personal responsibility for health.
The only question is: does America have any leaders, and if so, where are they?