Health Care Costs and Health Care Spending — Not the Same Thing
There's no argument about the need to cut government spending on health care. But when discussing health care you need to separate the ideas of spending from costs, since they can mean very different things.
(Courtesy, National Institutes of Health)
The debate over Medicare shows how these terms get blurred. Medicare spending is expected to rise substantially over the decade, as baby boomers reach Medicare age. The non-partisan Congressional Budget Office (CBO) projects Medicare spending to increase from $534 billion in 2010 to $878 billion by 2019.
Most plans to cut Medicare spending impose caps on the amounts spent, such as Rep. Paul Ryan's proposal to substitute an annual fixed amount for senior citizens to spend on health care. That amount would be indexed to the rate of inflation, as defined by the consumer price index (CPI). But, the Kaiser Family Foundation expects health care costs — those charged to the patients — to rise 5.8 percent per year between 2012 and 2020, much faster than the CPI.
Here's where you start to see the difference between spending and costs. Sure, you can cut spending, but when costs are still uncontrolled, then the patients either foot the bill or get sicker. And that's now been documented.
In a ground-breaking study, reported this week by the National Bureau of Economic Research people in Oregon eligible for Medicaid (not Medicare) were selected by a lottery in 2008, and the study measured the effects of having Medicaid against comparable Oregonians who were not selected. The non-Medicaid citizens made less use of medical services, had higher out-of-pocket expenditures, higher medical debt, and lower self-reported physical and mental health than those in Medicaid.
To control spending, first control costs
The trick is to deliver quality health care, but do it less expensively. Another report this week in a health policy journal shows how prescribing generic drugs rather than branded medications as part of a systematic strategy can help deliver quality care at far lower cost. The findings show the cost of drugs per year to lower LDL ("bad") cholesterol using generics to be only 20 percent of the branded price tag. And for controlling glucose, vital for diabetes sufferers, generic costs per year are only two percent of the branded medications.Continued on the next page