Tag: us healthcare costs

Cost Differences in Diabetes Care, and American Health Care

This morning’s New York Times’ piece on diabetes care annoyed me, and highlights the vast differences in costs for caring for the same kind of illness:

In the article, a type I diabetic incurs over $26,000 for her routine diabetes care annually. She uses much of the latest technology, and it costs a fortune.

I use syringes (bought wholesale online), generic insulin (WalMart’s Relion brand), generic test strips (also Relion), and see my endocrinologist once a year:

I pay around $750 a year to manage my type I diabetes. [1]

I don’t say this to brag, and every patient is different – some may genuinely require insulin pumps and the like. But my doctors pushed the insulin pump idea on me from day one, without considering other options. I could afford a pump, out-of-pocket if need be. So why did I refuse one and opt to try the “old-fashioned” way? Here are a few simple reasons:

  • I desired the simplest and least intrusive treatment that would work. No machines strapped to me 24/7, no intrusive wires.
  • New treatments are not time-tested, and are later found to have serious flaws. Note Avandia, a popular diabetes drug until it was pulled from the market for elevating heart risks.
  • Why not try a simple solution, and only escalate to a complex (and expensive) solution if it fails?

My treatment plan is working, as my A1C is low (generally under 6). While my approach wouldn’t work for every patient, shouldn’t doctors start simple and work up from there? Of course not – there’s no financial incentive to do so. But converting, say, 1 million diabetics (there are tens of millions in the US) from 25k/year to 1k/year treatment would save $24 Billion per year. At some point insurance companies, payors, and the government are going to have to wake up, and make cost-effectiveness a metric in health care decision-making.

[1] Since I use mostly generics, all of my expenses are out of pocket save my annual doctor’s appointment. Including the doctor’s appointment, associated tests, and both out-of-pockent and insurance reimbursements, the total cost of care is still less than $1000/year.

[2] I virtually never link to commercial interests in my posts, and I have never received compensation for doing so. I linked to Relion and American Wholesale Diabetes in this post simply to inform those who might benefit from the information.

Posted on by praveenghanta 1

Healthcare Bubble

Dot com bubble. Real estate bubble. Commodities bubble. Healthcare bubble? How can the US healthcare system be a bubble when tens of millions are uninsured and more people fall through the cracks daily? The media, public, and politicians alike have been more concerned with the inadequacies of the system than with its rapid growth. US healthcare spending has grown enormously, exceeding the rate of inflation for decades to become the largest sector of the US economy. The United States now spends over 16% of its GDP on healthcare, almost double the average for developed nations.

Perhaps Americans just demand the best and priciest healthcare, with the most modern technology and treatments. Other insurance prices are on a steep rise, including home, accidental and auto insurance. If Americans paid for healthcare themselves, this would simply represent a rational spending choice. But the federal government now incurs 60% of all healthcare spending, meaning that taxpayers, and not individuals, pay for most of our healthcare. Medicare, Medicaid, and other direct government healthcare accounts for 46% of healthcare spending, while tax breaks on healthcare subsidize another 10-15% of healthcare spending [1].

At current growth rates, government healthcare spending will exceed the entire Federal budget by 2050 [2]. Total spending on healthcare will near one-third of GDP by 2030. It’s unlikely that the US can devote 1/3rd of all productive capacity to healthcare without crippling other sectors of the economy and reducing overall economic growth. The healthcare bubble thus dwarfs all previous bubbles in size, since the technology, real estate, and energy sectors are all so much smaller.

How will the bubble pop, and what will its effects be? Since most healthcare spending is federal, the bubble will pop when the government can no longer afford its healthcare outlays. The US has been able to borrow freely by issuing debt for many decades, but this will eventually end once our debt exceeds GDP. With the current downturn, government debt may actually exceed GDP by 2015 [3]. Thus the reckoning may come sooner than many expect.

Will healthcare reform contain costs and deflate the bubble gradually? Most reform plans focus more on increased coverage than on cost control, so they may exacerbate the problem. Eventually the hard choices will have to be made, and they will include some combination of reducing Medicare benefits, cutting provider reimbursements, openly rationing government health care, and limiting the tax break on health insurance. I just hope that some of the hard choices are made before we are collectively up against a fiscal wall.

[1] $200 Billion in taxes are foregone as a result of the employer-based healthcare tax deduction, equivalent to 10% of all healthcare spending. When this subsidy is included the government’s share of healthcare spending rises to 56%. This analysis does not include the exemptions on property taxes and sales taxes that healthcare providers receive; adding these subsidies in would likely drive the government’s share of health care spending over 60%.

[2] The CBO predicts that Medicare and Medicaid will account for 14% of GDP by 2050. This figure doesn’t include healthcare spending through the VA system, SCHIP program, and other federal healthcare programs, which total $100 Billion in spending today. If these programs also grow commensurately, total government spending may near 18% of GDP in 2050, roughly equivalent to total government revenue.

[3] This projection of public debt growth shows that US government debt will exceed gdp by 2050. This only takes into account debt held by the public, however. Gross government debt is already above 65% of GDP, and may grow to 75% by the end of 2010 as a result of the recession and stimulus spending. With deficits of $500B+ per year possible for several year, US total government debt could exceed gdp in less than 10 years.

Posted on by praveenghanta 13

US Healthcare – Where does all the money go?

The Census Bureau recently released the results of its 2006 Services Industry Survey, which shed light in particular on where US healthcare dollars are spent:

Census Bureau Press Release: “Doctors and Dentists Account for 27 Percent of $1.6 Trillion in Health Care Revenue”

Full tabular data on US healthcare spending in 2006

The second link provides some detail on where US health care spending goes. It’s worthwhile to note that $117 Billion in Social Assistance is included, with line items like children’s daycare, community housing assistance, and other rolled into the overall Health Care and Social Assistance category. Without Social Assistance, health care spending is actually 1.45 trillion, or 11% of US GDP.
Read the full entry (500 words) …

Posted on by praveenghanta 3