Here’s why health care costs are increasing

//May 24, 2013

Here’s why health care costs are increasing

//May 24, 2013

There are two major factors causing health care costs to spiral out of control.

First, there’s the technology, the fact that we have developed a health care system that can do more to ease suffering, save lives and extend lifespan than we can afford. The good news is we continue to develop fantastic technology and other tools to deal with health issues. The bad news is that if we try to provide these techniques for everyone who could benefit, health care will soon consume 100 percent of our nations’ GDP. We know that won’t happen — our whole economy will collapse first.

As an example of the change in scope, back in the 1950s, my uncle had serious chest pains and was diagnosed by his family doctor with angina. He was told to take things easier, avoid stress and put a pill under his tongue when the pain was unbearable. Three years later, he died suddenly of a heart attack. The total cost was less than $50.

Now think about what would happen to my uncle today. His family doctor would likely refer him to a cardiologist. Angioplasty might lead to bypass surgery performed by a cardiovascular surgeon. Add up the diagnostics, the pharmaceuticals, the specialists, the tests, the procedures, the hospital, the rehab, the home care and so on, and the cost could easily top $500,000.

And think about all the other advances in health care over the past half century that add cost — CAT scans, MRI, PET scans, joint replacement, organ transplant, endoscopy, ultrasound, pharmaceutical advances, chemotherapy, pacemakers, defibrillators, cochlear implants and more (a complete list would fill this periodical). Health care is growing more powerful (and more expensive) by the day. Obamacare does nothing to address the trajectory.

Next, there’s a factor called “market elasticity.” Simply stated, this means that for a typical product or service, as the price goes down, demand goes up. For health care, there’s no way to predict any top end to demand increase for a service that many will perceive as “free,” or at least very affordable. The point at which that ache or fever calls for a trip to the doctor or ER relaxes significantly for every alleged drop in price point. Obamacare actually accelerates this factor.

Now to the legislation. The original objective was to ensure that all Americans have access to the same high-quality health care regardless of ability to pay. This is certainly a much-desired and compassionate goal. However, given the fact that the PPACA does absolutely nothing to address the two pillars of cost outlined above, there’s no question that we’re headed for a train wreck.

Even if we had the ability to finance universal delivery, we just don’t have the doctors, the nurses or the facilities to make that happen (and heaven help us, we sure don’t have the financial resources). Consider the fact that we already have a shortage of physicians: Obamacare intends to add up to 30 million additional souls to the system. How will we deal with that?

The legislation is hiring 10,000 IRS agents to monitor payment of fines for those who do not comply, but nowhere is the doctor shortage addressed. That tells you all you need to know about priorities.

In summary, here’s the formula: Ignore the Primary Causes Pursue Political Points = Train Wreck.