Counterparties: Can America’s doctors cure the deficit?
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The good news is that health care inflation is slowing. Recent data show that US health care costs grew 3.9% in 2011, matching 2010 and 2009 for the lowest rate on record. (Even Alka-Seltzer is getting cheaper).
The slowdown is particularly acute for government-run Medicare and Medicaid, where the Congressional Budget Office’s cost estimate for 2020 is now $200 billion lower than it was a couple of weeks ago. That’s a savings of about 15%. It’s unclear exactly why, but David Cutler and Nikhil Sahn write in the Journal of the American Medical Association that slower price increases and falling administrative costs — remember the hyped electronic medical records movement? — are likely drivers.
The bad news comes in the form of a 24,000-word article by Steve Brill, examining how medical treatment is priced in America, particularly for the uninsured. Brill exhaustively catalogues incidents like a $21,000 emergency room bill for heartburn, and diabetes testing strips with a 3,330% markup. No one writes smart responses to an article of this length in a matter of hours, but for the time being, here are three things to remember as you make your way through Brill’s article.
Firstly, Americans pay a lot more for healthcare than comparable countries. This spending accounts for 18% of US GDP — a number so large that it’s been called the equivalent of an 8% VAT. Secondly, anecdotal discussion of consumer pricing in industries with large and complex cost structures can be misleading. The cost of the aspirin a doctor hands out in the ER includes not just the cost of a single pill, but also the operating costs of the institution that delivers it, and that cost may be partially or fully covered by insurance — or the hospital itself. Thirdly, if we all knew the markup of every product we purchase on a daily basis, the percentage of Americans living on communes would increase drastically.
The much-discussed healthcare cost curve does seem to be bending in the right direction. The question is whether it’s bending enough — and whether the private healthcare industry can replicate the public sector’s savings, while improving care and extending it to more people. — Ben Walsh
On to today’s links:
Congress is about to do what it does best: hurt the economy by failing to do its job – NYT
The sequester is “another manufactured, self-inflicted, completely preventable crisis” – Charles Blow