Medical Costs: Out of Sight
Health-care costs in the United States continued out of control last year, increasing at more than double the national rate of inflation. And prospects are for even greater increases this year and next.
The release of those figures by the Health Care Finance Administration brought a quick response from President-elect George Bush, who called for new controls over Medicare and Medicaid, the massive government-funded programs for older Americans, for the poor and for the disabled. He chose a good starting point. But the fact is that Medicare and Medicaid did better last year than the private sector in terms of controlling costs.
Government programs together accounted for about 41% of the $500 billion spent on health care last year. The Medicare program, covering those 65 and over and certain disabled persons, paid for 27% of all hospital costs and 22% of all payments for physician services last year. Overall costs increased 7.7% over the previous year, compared with an overall increase of 9.8% for all national health expenses. Again, Medicare demonstrated its success in reducing in-hospital time through its prospective-payment system under which hospitals are compensated according to diagnosis on a flat fee rather than for all their costs in each case. Medicare hospital costs went up less than 2% last year. But Medicare physician services increased at a double-digit rate.
Medicare’s success in reducing acute-care hospitalizations is the exception rather than the rule. Although it has encouraged the private sector to reduce in-hospital use, outpatient surgeries have soared and were up more than 7% last year. The utilization of care--including more visits with doctors, more tests and more procedures--has continued to increase rapidly. And the number of Americans without any health care, thought to be around 38 million, has continued to increase--a measure of a major system failure.
An aging population, new technology, increased utilization and an increase in so-called catastrophic cases all are critical inflation factors. But the two most important elements are medical inflation itself and cost shifting, in which providers shift the burden of uncompensated and under-compensatedcare to private health insurers and idividuals, according to a study by Hewitt Associates, employee benefit and compensation consultants. They forecast a cost increase in health-care benefits covered by indemnity plans of 17% to 23% next year, with 62% of that increase in medical inflation and cost shifting alone.
There does not appear to be any easy solution. For employers providing health insurance, managed care will be used increasingly for their employees to limit procedures deemed unnecessary. Congress is expected to address the problem of the uninsured by mandating coverage of all workers despite the resistance of some businesses. Congress also is committed to finding a solution to the problem of long-term care that now impoverishes many older Americans, forcing them to exhaust their life savings before they can qualify for nursing-home coverage under Medicaid--Medi-Cal in this state. The Health Care Finance Administration appears to be moving ahead with stricter guidelines for physician compensation under Medicare, which would influence fees paid by private insurance as well. There already is substantial agreement on limiting diagnostic tests to those of proven value. But the problem has been complicated by an increasing supply of doctors whose numbers, rather than reducing costs through competition, appear only to have multiplied the rate of inflation.
Dr. William L. Roper, administrator of the Health Care Finance Administration, which oversees Medicare and Medicaid, expressed concern as he released the cost figures for 1987. He said that his agency was giving the “highest priority” to determining the most effective and appropriate methods of medical treatment.
“It is imperative that we identify the most effective means of providing health care to avoid unnecessary and duplicate procedures,” he said.
He is right. And the urgency becomes clearer with the growing recognition that the United States spends a higher percentage of its gross national product and more money per capita on health care than does any other nation, yet fails to protect about 38 million persons and lags in such basic measures of effectiveness as infant mortality.
