Why Healthcare Costs are Rising

[alan1]

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.

Exceeding 100% of GDP is an impossibility, by definition, 100% is the maximum possible.
To actually hit 100% on health care expenditure would mean that spending on even food would have to cease to exist.

 

[jreeves]

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.

Well other than killing people off there isn't much we can do about an aging demographic. Although, there are policies that we can enact that will help with obesity rates.

 

[Toro]

...
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.

The profit motive won't be gone. Rather, there won't be as much spending. It will lower profits but companies will still make a lot of money. Europe has many thriving healthcare companies despite universal healthcare.

 

[Oddball]

Who wants to invent something when some bureaucrat can just swoop in and confiscate it, under the rubric of "the common good"??

And don't insult my intelligence by telling me that can't happen.

 

[Harry Dresden]

...
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.

well junkie show us a comparision between profit motivated research compared to non-profit motivated research.....who has come up with more Technology and new medical science?....im sure you can can show us a huge list on this....

 

[Harry Dresden]

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.

well junkie show us a comparision between profit motivated research compared to non-profit motivated research.....who has come up with more Technology and new medical science?....im sure you can can show us a huge list on this....

HELLO Junky!!.....tap tap tap....is this thing on?

 

[Toro]

Who wants to invent something when some bureaucrat can just swoop in and confiscate it, under the rubric of "the common good"??

And don't insult my intelligence by telling me that can't happen.

Yes, it can happen. It nearly happened with Tamiflu a couple of years back.

But there would still be enormous amounts of money to be made.

 

[Oddball]

Somehow, I doubt that "enormous amounts of money" thingy.

If the FDA is indicator, the enormous amounts of money will be made by bureaucrats slowing the approval process for any new technologies and treatments down to a crawl, while beneficial treatments that don't help enough people to break even languish in a broom closet.

 

[Toro]

Healthcare is 17% of GDP and growing. That is nearly $2.5 trillion. That's a lot of money.

Don't get me wrong. Capping expenditures will have some effect. It has to. And I think we'd probably be worse off, given that less capital would come into the industry and thus incrementally fewer opportunities would arise. However, innovation would still occur. It would probably happen at a slower pace though.

 

[Oddball]

I'm so sick of hearing about the percentage of GDP thing I could barf....Nearly as violently ill as hearing about the (whatever number it's up to this week) million of uninsured....As though those are proof positive that a massive federal takeover is warranted.

Having the feds commandeer that much of the economy won't make those costs go down. To date, I have yet to hear any apologist for medical fascism name just one federal program that has come in at or under budget, while delivering a superior product.

 

[PeterS]

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

Bull. I recently had surgery for skin cancer. The post surgical kit consisted of a roll of flesh colored tape, gauze, and ointment. The cost was $175! Do not blame this on innovation because the only innovation here was how to bilk a customer for $175 when providing $10 worth of product.

Medical costs are going up because doctors can charge what they want and insurance companies pass this along with higher premiums. If innovation was the problem then costs would increase in some areas while declining in other areas. They aren’t, but advancing in all areas. Maybe Mankiw should go back and take one of the classes he teaches…

 

[Harry Dresden]

Somehow, I doubt that "enormous amounts of money" thingy.

If the FDA is indicator, the enormous amounts of money will be made by bureaucrats slowing the approval process for any new technologies and treatments down to a crawl, while beneficial treatments that don't help enough people to break even languish in a broom closet.

and that kinda shit should be stopped.....the broom closet specials...

 

[Oddball]

They're called "orphan drugs", and nobody has done anything about them since Reagan.

Damnable travesty.

 

[Ravi]

You are probably correct that improved technology is a big cause of rising health care costs. At the same time, it seems our buying power has shrunk...haven't salaries been stagnant for years? Might be a little tough to sell a product no one can afford to buy.

And where exactly do you purchase 1980s health care coverage?

 

[editec]

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.

Well other than killing people off there isn't much we can do about an aging demographic. Although, there are policies that we can enact that will help with obesity rates.

Killing off fat people probably won't get a pass in Congress.

Those liberal assed weenies are too softhearted to kill our beached whale population.

Perhaps your health care rates should be determined by your bodyfat content?

Oh stop blubbering you fat people, the idea makes perfect sense.

A bag of Fritos ought to cost about $50 and you know it.

 

[Skull Pilot]

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

Well other than killing people off there isn't much we can do about an aging demographic. Although, there are policies that we can enact that will help with obesity rates.

Killing off fat people probably won't get a pass in Congress.

Those liberal assed weenies are too softhearted to kill our beached whale population.

Perhaps your health care rates should be determined by your bodyfat content?

Oh stop blubbering you fat people, the idea makes perfect sense.

A bag of Fritos ought to cost about $50 and you know it.

replace "fat people" with smokers Ed or would that hit too close to home?

Should smokers and fat people pay more for health insurance....YES

but why does a "family plan" cost the same for me and my wife as it does for a couple with 4 kids?

 

[MaggieMae]

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

What's "new" is that doctors will prescribe an MRI scan when an X-Ray could do the job just as well in many situations. The difference in cost is enormous.

 

[MaggieMae]

No, it's idiotic.

Obesity has surpassed smoking as the number one killer because it can affect every part of the body, not just the lungs.

 

[MaggieMae]

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.

Childhood obesity is also on the rise.

 

[MaggieMae]

...
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.

So? We can't even cure what we've already got. Take the profit motive out of keeping diseases incurable like cancer, even the common cold, and I'll bet scientists would walk us out of those existing "dark ages" in no time.