Trends in Health Care Costs: 1950 to Present

Fine article in the NEJM by Victor Fuchs reviewing the relentless increase in health care costs since 1950. 

The most important explanation for the increase in real per capita health expenditures is the availability of new medical technology2 and the increased specialization that accompanies it. Between 1974 and 2010 alone, the number of U.S. patents for pharmaceutical and surgical innovations increased by a factor of six. Second in importance is the spread of public and private health insurance, which diminishes the effect of health care prices on demand.3 There is a positive-feedback loop between new technology and the spread of health insurance: new technology stimulates the demand for insurance, and the spread of insurance stimulates the demand for new technology.4 Finally, a small portion of the increase, typically 0.1 or 0.2 percentage points per year, is attributable to the aging of the population. It’s not possible to estimate how much of the increase in expenditures reflects higher health care prices and how much reflects greater quantities of care, because the content of a day in the hospital or a visit to a physician keeps changing. No doubt some of the increase in expenditures reflects an increase in the quantity of medical care, if quantity is adjusted for improvements in the quality of care.

Read the article. It’s complete text is available at the above link. 

Medicynical Note:  Of interest, since 1950 the largest proportion of  costs was and is for hospital care.  Shorter stays over the time period were balanced by higher charges and increase use.  Physician and drug costs also increased exponentially.  A catch-all category of including “public administration and the net cost (premiums minus benefits paid) of private health insurance, nursing homes, and dental services” also followed the trend

The tone of the article is not optimistic with reference to the current grid lock of political philosophies that interferes with an honest careful discussion and resolution of the issue.  There may be still some hope, as the author notes quoting de Tocqueville on America “events can move from the impossible to the inevitable without ever stopping at the probable”