The ultimate challenge of being a futurist is accountability for your prognostications. I’m particularly susceptible because I publish a lot more than others who assess long-run trends shaping the evolution of health care. Fortunately, the futures described in my writings from the 1980s and 1990s have played out as foretold. (The exception is my prediction that HIPPA would be repealed in 2008, a case of wishful thinking getting in the way of objective analysis.)
More than a few followers have been asking lately if I still stand behind the prediction I made in Paradox and Imperatives in Health Care (2008) that American spending on health care would stabilize at 17% of the gross domestic product, beginning around 2010. My view contradicted the prevailing belief that spending would continue to rise, reaching 20% of GDP in 2015. Initially, I took heat for predicting the end of growth in medical spending. But when the Great Recession hit later in the year, a few gracious critics even called to congratulate me for my contrarian perspicacity.
Then last month’s “health reform” resurrected conventional wisdom that health spending would continue growing. (See my March 30 post on Reform vs. Overhaul to understand the quote signs around “health reform.”) However, I stand behind my original prediction that health spending is peaking. If—and it’s a big if—the legislation is implemented pretty much as presumably intended, it will increase the number of Americans with health insurance. However, it will not increase their spending on health care for two reasons.
First, getting the laws passed required a political trade-off between breadth and depth of coverage. More people will presumably be covered, but overall coverage will be proportionally reduced because Democratic leaders promised the laws would not increase federal spending. Indeed, more than half the increased costs of coverage will be paid by decreased reimbursement to providers. Congress has historically reneged on such promises, but I think public pressure to reduce the deficit will prevail for the foreseeable future.
Second, due to new economic realities, consumers will not have disposable income to make up the difference when expected to pay higher premiums, deductibles, and co-insurance for expanded coverage. These unpleasant side effects of insurance overhaul will create a political backlash and almost certainly cause the laws to be changed, but nothing in the nation’s economic outlook suggests to me that consumers will have available resources to increase their personal spending on health care.
Please comment if you see a solution I am missing! Given my personal belief that health care is a pillar of national strength, I would be happy if my prediction were wrong. However, the economist in me believes just as strongly that progressive partnerships of providers, payers, purchasers, and consumers can build a great health care system with 17% of GDP. Your thoughts?
2 comments:
Dr. Bauer
Essentially, what you're saying is that the American public, will on the whole, received less medical care and, therefore, be in poorer health. That is until the lack of treatment for curable maladies leads to death: a surefire way to reduce individual's consumption of healthcare.
Even with each individual receiving less health care, the unavailability of providers willing to work for lower overall compensation will further accelerate the worsening health of Americans. This, paradoxically, will mean that the United States will continue to decline in relative measures of health.
Given that 80% of Americans were satisfied with their existing healthcare, I would not be as sanguine as your text suggests you are that there will not be continued pressure for increasing expenditures on health care. Albeit, that most of the expenditures will go directly into the pockets of SEIU members, while not leading to any improvement in quality or quantity of healthcare provided. This is a direct result of the federalization of healthcare and what has lead to significant increases in expenditures related to automatic unionization of home health workers (who were formerly independent contractors) and worsening state budgets.
I welcome and appreciate skptic's perspectives, but I do see some things differently. First, I am not "essentially" saying that less health care will mean poorer health. Indeed, problems arising from too much care arguably equal problems arising from too little. Developing systems to expand beneficial care and to reduce ineffective care would be a major tasks for those who would join me in designing the best health care that 17% of GDP can buy. Second, in this spirit, I think we should pursue policies to increase the productivity of our existing health professionals, not reduce their overall compensation. (In other words, let's help them earn what we pay them.) We're starting to face some serious shortages in qualified personnel; cutting incomes isn't sound policy under the circumstances because economic forces are pushing in the opposite direction. Finally, I agree with skptic that pressure to increase spending will grow. However, I still don't see where the money is going to come from to pay for the desired increase in demand for care. Show me the money, and I'll reconsider...
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