Posts Tagged ‘National Institute of Health Care Management Foundation’

Health Care Spending in Three “Terrifying” Charts – and One that Will Make You Feel Better

Wednesday, April 25th, 2012

Health care spending continues to rise, unsustainably so. If you’ve been paying attention, this isn’t news.

The words can only explain so much; yes, we know the top-level facts, but merely writing “health care spending continues to rise, unsustainably so” fails to provide context.

The Atlantic found that context, in the form of three graphs that it describes as “terrifying.” The article, by writer Brian Fung, picks up on a blog post over at The Incidental Economist by Austin Frakt, which republished charts from the National Institute of Health Care Management Foundation. The charts themselves — Fung published only three — are found here; they were part of a recent presentation by Julie Schoenman, PhD, the NIHCM Foundation’s director of research and quality.

With the proper citations out of the way, what do the charts show us? Of course, they demonstrate runaway spending on health care; of particular note is the acceleration of spending. The first chart — “National Health Spending Per Capita Now Equals 30% of Median Income” — show that between 1965 and 1989, per capita spending as a percentage of median income rose steadily by a little more than 10%. From 1989 to 2009 (and even taking into account a slight dip in the ’90s), spending rose 11.6%.

Changing the parameters doesn’t change the outcome. A second slide (“Private Health Insurance Spending Rose Almost 15 Percent in Past Five Years”) breaks down health insurance spending by activity in 2006 and again in 2010. The total increase in spending — bear in mind, this is only five years — is $108.5 billion, or 14.7% of the 2006 total. The two largest categories, hospital care and physician and clinical services, alone accounted for an increase of $76.3 billion. Left unsaid is that these rises show no sign of abating.

The final slide (“Faster Growth in Health Entitlement Spending Will Dramatically Worsen Projected Deficit”) looks ahead to government spending on health care as it relates to a deficit (-) or surplus (+) as a percent of GDP. Though the historical trend has lately been positive, the projected trend is, at best, flat; this baseline estimate drifts between +1% and -2%, returning to 0 around 2090. If costs rise more quickly than the baseline, even by 1 percentage point, the downward trend is more pronounced and levels out near -7% around 2060. If costs rise further still — two points faster than the baseline, which the chart notes is near the historical trend — the chart initially mirrors the previous course but never flattens. By 2090, spending is at -20% and is still headed south.

Scary? Certainly. But there’s a way out, and a fourth chart shows us the way.

We’ve asked this question since 2008, and we have yet to record less than half of the people who say that research is the solution to rising health care costs. That’s why we say that cutting research isn’t a deficit reduction strategy; quite the opposite. Investing in research and innovation brings more effective and more efficient treatments to patients, lowering costs down the road. As technology proliferates, it becomes less expensive and more widespread, bringing better therapies and treatments to the patients who need them.

By themselves, those charts are terrifying. But we know how to change those trends, and that makes them a lot less scary.