Along with millions of Americans, I've watched the unfolding financial crisis in horror. We hear of impending economic collapse, widespread bankruptcies, and threats of rampant joblessness—what the Washington Post calls financial Armageddon—absent a $700 billion taxpayer bailout. The thought that keeps running through my mind is that the underlying pathology is a feverish and long-ignored case of unsustainability—ballooning home prices and mortgage deals that obscured the real costs homeowners were taking on and were bound to blow up—uncomfortably parallel to the finances of medicine.
Healthcare costs are growing so fast that they are eating up state and federal budgets, overwhelming people's ability to afford premiums, and promising to crush families who find they must pay for care on their own. Some 158 million working Americans are at risk, as their total family insurance premiums have risen in round numbers from $6,000 in 1999 to $13,000 in 2008. Of this, the worker contribution is now about $3,400, a hefty sum, but one that obscures the real five-figure expense—which is even greater if one adds on the Medicare payroll tax that can run in the thousands. Overall, healthcare spending has grown numbingly from almost $700 billion in 1985 to almost $2 trillion in 2005, and common sense says that is unsustainable. For reference, the entire federal budget is $3 trillion.
According to the Congressional Budget Office, the biggest drivers of growth—accounting for roughly half—are new treatments and technologies. Look at Avastin, an important and shockingly priced new drug that treats cancer and prevents blindness. At upwards of $100,000 for a single year, this one drug bears a price tag that vastly exceeds the income of most who need it. Insurers stay solvent as their costs rise by charging higher premiums, increasing copayments and deductibles, and limiting coverage and denying claims. But what's needed is cost reduction, not cost shifting.
A lot has to happen for costs to stop growing. Transparency about spending and fairer pricing, for starters. It was a small but meaningful effort at cost control when patients boarded buses to Canada to buy drugs at half price; the U.S. government squashed it. Canada, like most European countries, negotiates prices that are available to everyone. Here, our state and federal governments negotiate wholesale prices for their "own" beneficiaries (veterans and Medicaid recipients, for example) but regard their discounts as trade secrets; manufacturers charge the public as they see fit. Similarly, the government and insurers use their clout to pay only half or a third of retail prices for other care, when wholesale is not available to the average Joe who is underinsured. The bill for one heart operation, for example, may exceed $100,000, while Medicare pays $40,000. No wonder almost 40 percent of the uninsured fend off bill collectors; so do 20 percent of those with insurance. Copays may be bearable for everyday care—but 20 percent of a $500,000 bill can bankrupt a family.
Clueless. Doctors are largely clueless about the cost of care they prescribe or its implications for a patient's personal finances and, until serious illness strikes, patients often are, too. But any good doc can tell you lower cost does not necessarily mean lower quality. A study led by John Wennberg at the Dartmouth Institute for Health Policy and Clinical Practice found that the cost of care for comparable patients during their last two years of life at the 18 hospitals in the 2007 U.S. News "Best Hospitals" honor roll ranged from $34,372 to $71,637, with the lowest-cost centers ranking at the top. The report concludes, "More is not better."
Innovations like health savings accounts that get patients to focus on cost reductions seem to work but are handicapped without ready information on cost and quality. And insurance markets must be restructured nationally to get away from fully loaded policies and enable people to find coverage that suits their individual needs and pocketbook, from someone with a pre-existing condition to the young healthy bachelor in search of an affordable catastrophic policy.
Changing our 50-50 blend of private and public spending into a single-payer system clearly is not feasible: Costs in countries with such systems are growing at rates similar to our own, and the $3 trillion federal budget could not swallow an added—and growing—trillion-dollar obligation. The way forward is to set aside rigid ideologies and focus all stakeholders, including doctors and patients, on sustainability—before insurance companies and hospitals go bust and the common folk face healthcare foreclosure.