Medicynic

It’s reported that consumer spending has increased since the 1960’s  from 61% to  71% of the the gross domestic product.  However, most of the increment is health care costs. 

Medical payments now account for about 16 percent of total consumer spending, more than food and clothing combined, which make up about 11 percent, or housing, which accounts for about 15 percent. The rising cost of health care means it will consume an even bigger share of the world’s largest economy as the population ages, according to economists like Jay Feldman.

“At the consumer level, it may squeeze out other discretionary spending,” Feldman, an economist at Credit Suisse in New York, said in an e-mail. “At the government level, rising Medicare and Medicaid spending will inevitably put pressure on other government spending priorities. At the business level, it could curtail investment, or more likely, suppress wages.”

Medicynical Note:  Increased discretionary consumer spending as a proportion of GDP (over the last 50 years in the U.S.) is an oxymoron.

Uwe Reinhardt has some thoughts on the “moderation” of health spending.  He notes:

First, depending on the beginning and end points one chooses for calculation, the average percentage points by which the annual growth in health spending has exceeded the average annual growth in G.D.P. over the chosen period – a difference known among health policy analysts simply as “excess cost growth” – can vary quite a bit. One really needs charts like these to study the phenomenon, not point-to-point averages.

Second, the annual growth in real health spending per capita appears to have fluctuated around a long-run trend that has declined ever so gently over the longer period (see the blue line in Chart 3). That trend reflects in part that the annual growth in real G.D.P. per capita has also fluctuated around a gently declining trend line. As is shown in Chart 4, the trend line around which excess growth fluctuates is virtually flat.

The graphs show a huge yearly difference in the rate of increase in health care spending.  Read the article to view them.

Medicynical Note:  What’s missing from the article is a comparison of the increase in costs of health care with increases (or lack thereof) in income over the same period.  GDP increments miss entirely the huge disparities in wealth that have evolved in the past 30 years and the resulting poverty, decreases in real income, and decreases in the ability to pay for anything, including health care. 

The dilemma of U.S. health care is seems obvious.  Our costs have exceeded our individual and collective ability to pay.  How to resolve the disparity is the issue.

Mad Magazine famously pointed out the inflation in medical costs in the late 60’s with a parody on ads by Parke Davis (By Ken Freas). 

Parody sadly has become reality:  Outpatient shocked by $45 billion bill.

McKinsey group believes the slowdown in the growth of health care spending is complicated but at least in part driven  by “value” seeking consumers .  They note that consumers are paying a larger proportion of their health care expenses and that makes them more conscious of cost.

Remember we are talking about  a decrease in the rate of increase, not an actual decrease in the amount spent. In fact, our spending per-capita still far exceeds what one would expect even given our wealth when compared with other countries around the world.  This is evidence of an inefficient non-competitive approach. 

The historic slowdown in spending growth was caused by the convergence of a number of factors, including changes in benefit design, structural shifts within specific segments of the health economy, and a recession from which the U.S. economy has been slow to recover. Changes in coverage patterns and the decline in the share of the population with private insurance during the recession have also played an important role. Between 2007 and 2009, the number of people with employer-sponsored or private individual insurance fell by nearly 10 million. In 2009, the share of Americans with private insurance slipped to 64.5 percent – the lowest in 20 years of census records – while the share receiving public assistance and the percent uninsured both reached record highs. 

Despite the “slowdown”  our costs/capita for health care remain by far the highest in world.  For example hospital costs, even with the decreased “utilization:”

 Medicynical Note:  Mckinsey may view this decreased rate of increase as a search for value in health care, which is laudable. 

However, searching for value when it’s driven by lack of insurance, substandard coverage and poverty  easily morphs into inadequate access, delays, and substandard health care (economic rationing).

We’ve commented previously on the need for regulation.  In health care this is particularly the case because of the consequences.

The recent and ongoing breast implant problems from Poly Implant Prosthese (PIP) devices could well have been a major issue in the U.S. but for the FDA taking seriously it’s mandate to assess the safety of medical devices.

The now-defunct PIP was recently found to have sold implants made with industrial-grade silicone to some 300,000 women worldwide, sparking a global health scare. France’s government instructed 30,000 French women to have their implants replaced due to a high rupture rate, and the country’s health minister has called for Mas to answer for the actions of a “shady business.”

In the United States, where the FDA had banned all silicone implants from 1992-2006, PIP sold a line of saline-filled implants starting in 1996. The business accounted for up to 40 percent of its revenue, according to company securities filings. McGhan’s MediCor signed on to distribute the products in 1999, but a year later the Food and Drug Administration (FDA) conducted a new review of the devices and decided there wasn’t enough data to show they were safe.

The agency then sent an inspector to PIP’s plant in France, who found multiple violations of accepted manufacturing practices and determined the products to be “adulterated,” Reuters has reported.

Medicynical Note:  Read the entire article to get a sense of the aggressive marketing of these devices.  When money is involved people do funny things.