Another Analysis of Health Spending Growth

The Bipartisan Policy Center is a well-intentioned, but forlorn and probably doomed effort to find common ground to address big problems.  It has turned its attention to one of the biggest problems of all, health spending and its effect on the federal and state budgets.  It has issued a report focusing on factors underlying the growth of health spending.   (Spending Report)    The report notes the obvious–that total health spending on a per capita basis is a result of number of services used and the cost of each individual service.  It then attempts to ascertain the effect of each.  While growth slowed recently, primarily due to number of services used, it is expected to begin to rise more rapidly again soon.  According to this report, in the period 2000 to 2006, price increases and use increases contributed about equally to spending growth, but since then, price increases are almost exclusively responsible for the growth.  The primary drivers identified by the authors (aside from population growth, which does not affect per capita spending) include the usual suspects:  fee-for-service reimbursement; care fragmentation, administrative burdens and costs, increasing rates of chronic disease driven by poor lifestyle choices, advances in medical technology, the use of third-party reimbursement, etc., etc.

So far, nothing new and nothing particularly inspiring in the rest of the report either, which consists mostly of a slightly detailed look at each of the listed drivers.  Lets examine a couple of the more interesting ones.  For example, there is a section detailing the usual complaints about our complex billing and claims systems and giving the usual greatly exaggerated alleged cost of these, without noting that much of that complexity is driven by government regulations and requirements.  There is reference to the effects of the health insurance tax exclusion and the presence of third-party payment as affecting spending, but no analysis of the fundamental flaw of decoupling an individual from the consequences of spending.  The authors do note the role of high prices in the US, our drugs cost 2.3 times as much as in other countries and we pay our physicians and administrative personnel far more.  There is a nod to the effect of practice restrictions on non-physicians, the loosening of which could have a very significant impact on unit prices for many services.  All-in-all, pretty vanilla.  The report refers to our health spending as an “unsustainable” burden.  If it is that, it is only because we are relying on governments to pay for it.  If individuals paid for their care, they could make decisions about how much care they wanted and what they would pay and whatever that total was, would reflect the sum of all those choices and could hardly be said to be unsustainable.