Why Healthcare Costs are Rising

[Toro]

Spending on pet healthcare have actually grown faster than on humans.

Why are all healthcare expenditures rising? Because new innovations cost more.

This chart from Andrew Biggs "shows spending on veterinary care, which I pulled from the Consumer Expenditure Survey, and national health expenditures (for people) from the National Income and Product Accounts.... the rate of growth of spending from 1984 to 2006 wasn’t all that different—and in both cases, spending grew faster than the rate of economic growth. As new technologies are developed for humans, we adopt them for Bowser and Fifi—because we can afford to and we think it’s worth it."

These data are consistent with what I wrote a couple years ago: "The reason that we spend more [on healthcare] than our grandparents did is not waste, fraud and abuse, but advances in medical technology and growth in incomes. Science has consistently found new ways to extend and improve our lives. Wonderful as they are, they do not come cheap. Fortunately, our incomes are growing, and it makes sense to spend this growing prosperity on better health."

Greg Mankiw's Blog: Keeping Animial Spirits Alive

 

[Oddball]

You mean that even though the costs have risen, we're getting more value for the money?!?!?!???

Well, I'll be dipped!!

 

[auditor0007]

Spending on pet healthcare have actually grown faster than on humans.

Why are all healthcare expenditures rising? Because new innovations cost more.

This chart from Andrew Biggs "shows spending on veterinary care, which I pulled from the Consumer Expenditure Survey, and national health expenditures (for people) from the National Income and Product Accounts.... the rate of growth of spending from 1984 to 2006 wasn’t all that different—and in both cases, spending grew faster than the rate of economic growth. As new technologies are developed for humans, we adopt them for Bowser and Fifi—because we can afford to and we think it’s worth it."

These data are consistent with what I wrote a couple years ago: "The reason that we spend more [on healthcare] than our grandparents did is not waste, fraud and abuse, but advances in medical technology and growth in incomes. Science has consistently found new ways to extend and improve our lives. Wonderful as they are, they do not come cheap. Fortunately, our incomes are growing, and it makes sense to spend this growing prosperity on better health."

Greg Mankiw's Blog: Keeping Animial Spirits Alive

There is no argument that a good portion of the increases in healthcare spending are due to new innovations and technologies that have helped extend the lives of most people. The problem is that the rate of increase is unsustainable financially. Based on the rate of growth over the last twenty years, if we continue at that same rate, we will eventually spend more than 100% of GDP on healthcare.

There is a limit as to how much a society can spend on healthcare, and we are reaching the breaking point. As costs continue to rise, we will see more and more Americans without insurance or some type of healthcare coverage. So fewer and fewer people will actually use or be able to pay for all these advances. This in turn will increase costs even more for those who can afford to pay until they can no longer afford it either. In the process, many will actually see the healtcare available to them become even more limited, and eventually we will begin regressing instead of progressing when it comes to our overall health and longevity.

 

[editec]

Why is HC caost rising?

Supply and demand is the primary reason.

Not the only reason, of course, but the major factor leading us to this state.

 

[code1211]

Why is HC caost rising?

Supply and demand is the primary reason.

Not the only reason, of course, but the major factor leading us to this state.

I think the reason that the costs are increasing is because there is no incentive for them to decrease. There is no WalMart alternative to the Macy's care available.

If a doctor tries to give care on the cheap, he is liable to be sued. Walk in clinics are plentiful on college campuses with inferior care and no charge. Where are these in the general public? Non-existant due to regulation.

With insurance, no interest in the cost is the norm. Just make it stop hurting.

Supply and demand would bring forth hospitals stating the cost of an appendectomy, for instance, the way Eye Glass providers state the cost of an eye examination.

Health insurance is far more pervasive than is Vision.

The cost of our health insurance is high precisely because there is no competition in the health industry. There is competition in the Health Insurance industry already. Fierce competition.

As always, the government sees a problem and tries to fix it by doing something that is unrelated to the cause.

 

[Toro]

The cost of old healthcare technology is rising. If one wants to have the same healthcare as they did in 1980, it is far cheaper now to do so than it was 30 years ago.

But if you want 2009 healthcare technology, then it is more expensive.

 

[editec]

Why is HC caost rising?

Supply and demand is the primary reason.

Not the only reason, of course, but the major factor leading us to this state.

I think the reason that the costs are increasing is because there is no incentive for them to decrease. There is no WalMart alternative to the Macy's care available

.


Yeah I can sign onto that in part, to be sure.

If a doctor tries to give care on the cheap, he is liable to be sued.

True

Walk in clinics are plentiful on college campuses with inferior care and no charge. Where are these in the general public? Non-existant due to regulation.

Yes, that is also more or less true.

With insurance, no interest in the cost is the norm. Just make it stop hurting.

Third party payment systems of any kind (public or private( disencentivise comparison shopping of course. But in the HC field comparison shopping isn't exactly easy to do, either.

Supply and demand would bring forth hospitals stating the cost of an appendectomy, for instance, the way Eye Glass providers state the cost of an eye examination.

You and I are at least in part on the same page. I have been saying for quite some time that increasing DEMAND without at the same time increasing SUPPLY is bound to lead to increased prices,

Health insurance is far more pervasive than is Vision.

Not sure that that means.

The cost of our health insurance is high precisely because there is no competition in the health industry. There is competition in the Health Insurance industry already. Fierce competition.

Not really. But since insurance is a pass through system, they're not incentivized to keep HC costs down, either.

As always, the government sees a problem and tries to fix it by doing something that is unrelated to the cause.

Always? No.

Often, espeically if some special interest is behind the "solution"?

Yeah.

 

[MaggieMae]

I read this shocking blurb in THE WEEK and went in search of sources, finding many, and one link is posted below. A major part of rising health care costs would appear to be the skyrocketing costs of medical school and the salaries new doctors can expect (bearing in mind the student loans most need to face for years into the future). The second part of this particular scenario of course is that these 'new' doctors will seek out the best paying jobs, which are no longer found in family practice.

From THE WEEK, 07.17.09

"Since 1997, the numer of medical school graduates going into pediatrics or family medicine has dropped by 50%. New doctors are opting instead for specialties such as orthopedic surgery, which pays an average of $480,000 a year, instead of pediatrics, whh pays $171,000." [Dallas Morning News]

Study Links Primary Care Shortage With Salary Disparities

So this leaves the unanswered predicament: People continue to suffer the same type of ailments that don't require high tech resolution, yet finding physicians to treat, say, bronchitis probably winds up costing (someone) as much as if he were being treated for cancer.

 

[Oddball]

The cost of old healthcare technology is rising. If one wants to have the same healthcare as they did in 1980, it is far cheaper now to do so than it was 30 years ago.

But if you want 2009 healthcare technology, then it is more expensive.

Funny thing is that the same model applies to color televisions and CD players and computers and on and on.

It's as though my econ 101 teacher actually knew what he was talking about!!

 

[Toro]

Actually, I see a typo.

The cost of new healthcare technology is rising. If one wants to have the same healthcare as they did in 1980, it is far cheaper now to do so than it was 30 years ago.

But if you want 2009 healthcare technology, then it is more expensive.

Fixed.

 

[Oddball]

Newer technology is always more expensive...What else is new??

 

[jreeves]

Spending on pet healthcare have actually grown faster than on humans.

Why are all healthcare expenditures rising? Because new innovations cost more.

This chart from Andrew Biggs "shows spending on veterinary care, which I pulled from the Consumer Expenditure Survey, and national health expenditures (for people) from the National Income and Product Accounts.... the rate of growth of spending from 1984 to 2006 wasn’t all that different—and in both cases, spending grew faster than the rate of economic growth. As new technologies are developed for humans, we adopt them for Bowser and Fifi—because we can afford to and we think it’s worth it."

These data are consistent with what I wrote a couple years ago: "The reason that we spend more [on healthcare] than our grandparents did is not waste, fraud and abuse, but advances in medical technology and growth in incomes. Science has consistently found new ways to extend and improve our lives. Wonderful as they are, they do not come cheap. Fortunately, our incomes are growing, and it makes sense to spend this growing prosperity on better health."

Greg Mankiw's Blog: Keeping Animial Spirits Alive

Bingo...

In addition, look how obesity rates have risen in the US recently. Obesity leads to diseases which is very expensive to treat. In the long run it drives up the costs for everyone.

 

[AllieBaba]

Rising health care costs are caused by obesity?

good grief.

 

[jreeves]

Rising health care costs are caused by obesity?

good grief.

Do you not agree?

 

[AllieBaba]

No, it's idiotic.

 

[Oddball]

Bingo...

In addition, look how obesity rates have risen in the US recently. Obesity leads to diseases which is very expensive to treat. In the long run it drives up the costs for everyone.

True as that may be, I'd bet the aging demographic has at least as much, if not more, to do with it.

 

[xsited1]

...
Why are all healthcare expenditures rising? Because new innovations cost more.
...

And once we get universal healthcare, the innovations will slow considerably because the profit motive will be gone. We'll enter a 'dark ages' period of medical science.

 

[Political Junky]

...
Why are all healthcare expenditures rising? Because new innovations cost more.
...

And once we get universal healthcare, the innovations will slow considerably because the profit motive will be gone. We'll enter a 'dark ages' period of medical science.

That's certainly a talking point that seems to work on some.

 

[Oddball]

Talking point nothing.

Remove the profit motive and there's no incentive for innovation.

 

[xsited1]

...
Why are all healthcare expenditures rising? Because new innovations cost more.
...

And once we get universal healthcare, the innovations will slow considerably because the profit motive will be gone. We'll enter a 'dark ages' period of medical science.

That's certainly a talking point that seems to work on some.

It only works on people who understand what is going on. If you've bought into the idea that Government-run healthcare is the answer, you'll never understand the truth.

For everyone else, here's a great commentary that discusses this very important issue:

...

Just as there is potential danger from the way in which Americans take the power of the antibiotic for granted, so, too, one of the greatest threats to our health and continued welfare is that Americans in the present day, and particularly their leaders, are taking for granted the power, potency, and progress flowing from life-saving medical innovations. And in so doing, they may unknowingly prevent the kind of advance that could contribute as vitally to the welfare of the 21st century as the discovery of the antibiotic altered the course of human history for the better in the century just concluded.

The End of Medical Miracles? - WSJ.com