• News flash! We haven’t been good about controlling health care spending!

    From Kaiser Health News:

    A forthcoming report from the Congressional Budget Office shows that more than two dozen demonstrations projects launched by Medicare and Medicaid over the past decade have failed to stop the upward march of health care costs, CBO director Doug Elmendorf said Tuesday. But health care policy experts say the findings paint too gloomy a picture.

    The CBO pronouncement will heighten pressure on politicians from both political parties to come up with new health care cost savings beyond those contained in the health care reform bill, whether as part of the current debt ceiling talks or in separate legislation. Federal spending on Medicare and Medicaid totaled $739 billion in 2010, making health care the single largest budget item in the federal budget. Those costs are expected to nearly double in the next decade.

    It’s as if no one has seen the chart above in the last few years.

    I just can’t bear the fake outrage we’re going to likely see over this report. Yes – health care spending has been going up dramatically. Yes – little we have done in the last decade has slowed it. Yes – many of the cost controls, even in the PPACA, will likely not be enough.

    That’s why we need to try new things. A strengthened IPAB is one idea. There are others. But controlling costs will have consequences, and if we demonize them at every turn (DEATH PANELS!), then we shouldn’t expect anything but what we’ve seen before. Like in the chart above.

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    • Aron, there are no cost controls in PPACA. There never were. People on the left only know two ways of controlling costs : (1) squeezing the providers (which is realy cost shifting) and (2) rationing care. Since they don’t believe in incentives or markets or entrepreneurship or any of the other ways costs are controlled in normal markets, that’s all they have left.

      After all the discussion of “death panels,” there’s not much chance of any serious rationing. So that leaves us with nothing to do except shift costs to doctors, nurses, paramedical personnel and anyone else who has the misfortune to be in one of the healing professions.

      • John,

        I will take exception with the notion that there are “no” cost control measures. I believe there are any number of them. However, I agree that nearly all of them aren’t robust enough, so I don’t want to waste time defending them.

        However, unlike many in political discourse, I don’t think “ration” has to be a four letter word. I believe that we can have a panel of experts (which should include physicians) try and determine which care isn’t worth as much money and stop spending as much public money on that. This will mean that if individuals want to get that care anyway, they have to pay for it themselves.

        Yes, this involves cost-shifting, but it’s targeted towards less cost-effective care, and I have no problem discouraging (but not prohibiting) that.

        Many would call me a lot of four-letter words for suggesting that.

      • John, if price controls never work, why are Europe’s prices about half as high as ours? I don’t mean utilization, I mean prices. What do France, Germany, The Netherlands and Italy do to get their prices so low…free markets? No.

        • Because they subsidize it. They are still paying for it with higher taxes.

          They cap the amount doctors get paid. This is because they also pay for their schooling.

          Since we don’t, it wont work.

          I am sure you would like to pay for your own doctorate and then find out
          that you can only make 30% of the money you thought you would.

          and then find out that the guy that graduated the year after you didnt have to pay for college.

    • You can try as many new things as you want. But, don’t you think it’s time we admit it is our culture? We want very expensive treatments in order to gain marginal benefits; we want to do as many tests as possible in order to sleep better at night; etc., etc.,. Unless the culture is changed, voluntary or otherwise, no way our health care cost will come down.

    • When I look at just “excess cost growth” from an international perspective, it seems like (at least over the last 10 years or so) we actually don’t do that much worse. The OECD has averaged about 2% over GDP and we have averaged above 2.2% over GDP. Does anyone do a good job at this? And doesn’t it show that the ACA’s goal of GDP +1% would be a pipe dream anywhere in the world?

      • Bracktune, that is a strange argument to make. For a nation that spends twice as much as other nations for approximately the same level of care, to increase its costs 2.2% faster than GDP does not mean the same thing as for the other nations to increase it by 2%.

        You need an argument for why the US can’t get to the level of spending of other nations, since it such an extreme outlier. What is your argument for why a hospital stay here has to cost 2-3 times as much as a hospital stay in Europe? The arguments that cultural and political forces drive our failure to sensibly ration (whether through government or market forces) or to control prices (again through market forces or government) are relevant.

    • Can someone, anyone explain how there is any incentive for cost control in a fee-for-service based system by health care providers?

      Isn’t the incentive for “anti-cost control”

      • In a market where purchasers exercise lots of discretionary power and are price sensitive, cost control can happen in a fee for service market. Think of the cost of lawn mowing or getting a manicure. Fee for service, but not out of control. The problem is that healthcare doesn’t work as an efficient market.

    • This chart is great for several reasons. One is that you can see that we were not an outlier as late as 1980. So any “cultural” difference in the US cannot have been some deep difference that set us apart from the beginning.

      Another nice feature of this graph is that it shows almost all of our runaway growth in health expenditures occured in two decades: the 80s and the 00s. Eyeballing it, it looks like nearly 100% of our outlier costs are due to these two decades. If we had had global average growth rates in those two periods we would still be a normal nation. Weird for Democrats and the left to get blamed when those decades were the periods in which we had a rightward turn and Republican presidents, also a Republican congress for some of the time. I know this blog has discussed the cost growth in the 80s, which was mostly facilities costs (mostly outpatient). Has anyone here also done a series on cost growth in the oughts?

        • Good point. So so the 80s and 00s were low GDP growth decades, relatively speaking, which magnifies the growth of health care spending as a percent of GDP. There still is a mild acceleration of costs in the late 80s and early 00s when you ignore GDP and focus just on health care costs.

          But if you’re going to work the political angle on this, the question would be more about why Republican administrations have presided over slower economic growth than about why health care costs go up faster.