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Rising Medical Costs, but No Solution in Sight

Nearly everyone agrees that the rising cost of healthcare is unsustainable and that the current efforts at healthcare reform will do little if anything to reduce healthcare expenditures. Although there seems to be no shortage of proposals on what should be done, there is little consensus on whether any of them will succeed.

Medical spending is skyrocketing, leaving us two choices: rationing care or rational care.

According to the Milliman Medical Index (MMI), the average total medical spending for a "typical" American family of four is $18,074, which is an increase of $1,303 over 2009 and the greatest total-dollar increase in the history of the MMI.

What's the Patient Protection and Affordable Care Act (PPACA) or ObamaCare going to do about that?

Spend more; get more

They will actually increase healthcare expenditures a bit (probably 1-2%), but it will also expand healthcare coverage to more folks, reduce current "overpayments" (eg, to Medicare Advantage insurers), and reduce hospital and physician payments. It will increase the Medicare tax on high earners, add an assessment on certain employers who don't use employer-sponsored insurance, and it will levy a "Cadillac tax" on the insurance plans with the richest coverage (especially first-dollar coverage).

All of this is generating considerable animosity toward President Obama in the boardrooms of corporate America, leading Paul Krugman to compare Obama’s predicament to some of the domestic challenges that confronted FDR. According to Krugman, the president "finds himself very much in the position Franklin Roosevelt described in a famous 1936 speech, struggling with ‘the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.’”

It may reduce the federal deficit, and yours

In less than 10 years, the United States will be spending $46 billion more on medical care than we do today. However, in today's dollars, that is only $800 per newly insured person. Compare that sum to the $5,000 average single premium currently being paid for employer-sponsored insurance.

How far can we expect the PPACA to go in slowing healthcare cost inflation? Not far, I imagine, for two basic reasons: the incentives to clinicians do the right thing at the right time and place are not aligned, and there's a dearth of primary care docs — only 20-30% of US physicians are in primary care, compared to over 40% in the rest of the world. All we seem to come up with are political salvos when a broadsided attack is needed.

Nevertheless, according to a piece in the NEJM by Jonathan Gruber, PhD, there is no shortage of good ideas for how to control the rate of growth in healthcare costs, with proposals "ranging from reducing consumer demand for health care services, to reducing payments to health care providers, to reorganizing the payment for and delivery of care, to promoting cost-effectiveness standards in care delivery, to reducing pressure from the threat of medical malpractice claims.” Gruber claims there is, however, “a shortage of evidence regarding which approaches will actually work — and therefore no consensus on which path is best to follow."

This sets the stage for the re-emergence of managed care, but will it succeed where it has failed in the past? The canary in the coalmine issue is to see what happens to mental healthcare and the use of MSW social workers.