I was reminded by a short story in the Kansas City Star over the weekend about a report from the Congressional Budget Office published in November 2007. In The Long-Term Outlook for Health Care Spending, the CBO forecasts that health spending – including Medicare, Medicaid, and all other spending — will consume the entire U.S. gross domestic product in 2082 projected health care spending cost continues at historical averages. The chart illustrates this trajectory.
The Obama Administration’s focus on cost containment is aiming squarely at this future state. For their part, industry stakeholders have been ante’ing up their bets on how to stem their roles in this inexorable health cost inflation. Take a look at health plans, pharmaceutical manufacturers, and doctors for a snapshot on where they are on cost containment.
The health insurance industry is represented by America’s Health Insurance Plans (AHIP), Karen Ignani, AHIP president and CEO, said in a statement that, “Reducing the rate of growth of health care costs is an urgent national priority….Unless bold action is taken, the health care system will be unaffordable and crowd out other critical national priorities – a situation which would be devastating to families, employers and our country as a whole.” That’s the 99% end-game she’s talking about – the crowding out of other national priorities like education, infrastructure, safe food, and defense.
PhRMA, the prescription drug association, committed $80 billion in savings on drugs over 10 years, including selling drugs at half-price to seniors who fall into the Medicare Part D donut hole.
The American Medical Association (which represents fewer than 50% of physicians) says it’s committed to “making private insurance more affordable,” along with principles of “pluralism, freedom of choice, freedom of practice and universal access for patients.” When it comes to cost containment, the AMA hasn’t offered a lot of concrete suggestions except for a need for malpractice caps.
Health Populi’s Hot Points: Clearly, the microeconomy of health care is a core component of the U.S. macroeconomy. Getting to “yes” on health reform and cost-containment might not be so difficult if we take the advice of Uwe Reinhardt and David Riemer that they offered in a New York Times op-ed on June 25th 2009. In their best of all possible worlds (in our health politics-constrained world), a health insurance exchange could be built on choice, competition and incentives thus meeting critics on all sides somewhere in the middle.