published Thursday, February 6th, 2014

Cleaveland: Slicing, dicing health dollars

Clif Cleaveland

Health care expenditures (HCE) as a percentage of gross domestic product remained stable in 2012, the most recent year for which data has been analyzed.

Health care accounted for 17.2 percent or $2.79 trillion of GDP for the year, a slight decrease from the previous year. Per capita HCE rose to $8,915. Spending trends and their implications are discussed in the January issue of Health Affairs.

These figures contrast with those of Canada, France and Germany, where HCE are below 12 percent. In further contrast with the U.S., these countries provide uniform health coverage for all of their residents. The percentage of Americans without health insurance dropped in 2012 to 16.1 from 17.3 the previous year. The decline is attributed to the Affordable Care Act (ACA). Forty-six million residents remain uninsured.

Households accounted for 28 percent of HCE, a figure that includes out-of-pocket expenses, health insurance premiums and contributions to Medicare. Out-of-pocket costs increased as a result of higher deductibles and copayments and services not included in insurance coverage. Private businesses, through a variety of health insurance programs for employees contributed 21 percent of HCE.

The federal government provided 26 percent of HCE through Medicare, Medicaid, the U.S. Public Health Service, military and veterans' health services and funding medical research. State and local governments contributed 18 percent.

Costs generated by physicians, clinical services and hospitals grew by more than 4 percent in 2012. Clinical services include emergency rooms, ambulatory surgery centers, and dialysis clinics. Physicians dictate to a great extent the volume and intensity of in-patient and out-patient services. Other studies document wide regional variations in these practices and expenses within the U.S.

Slower growth of costs was seen in nursing home care and pharmaceuticals. Medicare reduced reimbursement in 2011 for long-term care to account for the former. The cost of prescription drugs was affected by the expiration of patents of a number of widely prescribed drugs and the increasing availability of a range of generic alternatives. In a number of instances, however, the price of popular generic drugs such as statins has sharply increased. Recent steep increases have occurred in some medications used in cancer therapy.

The overall slowdown of HCE may be due entirely to lingering effects of the recent economic recession. If so, the rate of growth of HCE will accelerate substantially over the next several years as the economy continues to recover. Other factors may account for the slowing.

The effects of the ACA cannot yet be estimated. Among states that chose to expand Medicaid eligibility, growth in these programs has been modest. Health care exchanges in those states that elected early participation are too new to assess. Massachusetts, which began implementation in 2006 of its health insurance system -- known as MassHealth or "Romneycare," and the system upon which much of the ACA was modeled -- experienced growth of HCE for several years before costs began to flatten. The state has reduced the percentage of uninsured residents from 6 to 2 percent.

If HCE once again rise more rapidly than gross domestic product (GDP), other societal needs, such as education, environmental protection and renewal of infrastructure will suffer. The ACA was formulated to broaden coverage, control health care spending and improve quality. Opponents of the program have slowed the rollout in many states of the ACA. Some opponents support junking the ACA altogether either nationally or in individual states. They offer no plausible alternative.

Health care statistics represent real people. Politicians, economists and providers of health services must be mindful of this.

Contact Clif Cleaveland at cleaveland1000@comcast.net.

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