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Health care cost projections

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Health care cost projections

Postby kurt_w » Mon Nov 25, 2013 8:47 am

Over the past half-century, the cost of health care has been increasing faster than the rate of inflation. And with the baby boom generation retiring, there is an obvious cause for concern that future health care costs would skyrocket.

But that is changing. In recent years, the rate of health spending growth has been falling:

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Projections for future health care spending have been falling rapidly. For example, as recently as 2010, projected costs for Medicare + Medicaid in 2020 were around 5.8% of GDP. By 2012 those projections had fallen to around 5.5% of GDP, and by May of 2013 they had fallen even more drastically, to around 5.0% of GDP:

Image

Insofar as health care costs are still rising, it's really only the private insurance industry that's responsible for this growth. Since 2010, Medicare costs per capita have been flat, and Medicaid costs per capita are actually decreasing. Private insurance is still increasing at an average annual rate of around 1.5%.

But even this is a huge improvement over conditions in the early 2000s, when private insurance and Medicare were both increasing at average annual rates around 5%:

Image

It's increasingly obvious that Obamacare's reliance on private health insurance was a mistake. Public health care programs such as the VA, Medicare, and Medicaid are much more cost-effective than private insurance. Within the context of Obamacare itself, the private health care exchanges have mostly been a disaster so far, but the expansion of Medicaid has been proceeding rapidly and effectively.

So the good news is that health care costs are turning out to be quite a bit lower than projected in the past. And cost savings in public health care programs are responsible for most of that improvement.
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Re: Health care cost projections

Postby Huckleby » Mon Nov 25, 2013 11:07 am

kurt_w wrote: But that is changing. In recent years, the rate of health spending growth has been falling:


rate of growth. A very deceptive statistic.

The primary reason health care spending has moderated is that the economy has been weak. Also, deductibles have gone up for people with private insurance. Both factors have caused people to resist seeking care. The costs for services haven't moderated a bit.

kurt_w wrote: Insofar as health care costs are still rising, it's really only the private insurance industry that's responsible for this growth. Since 2010, Medicare costs per capita have been flat, and Medicaid costs per capita are actually decreasing. Private insurance is still increasing at an average annual rate of around 1.5%.


These numbers are artificial and misleading. Medicare and medicaid control costs TO THE GOVERNMENT by capping payments to providers. With medicaid in particular, services are being delivered well below costs to providers. The providers stay in business by shifting the costs to people with private insurance.

kurt_w wrote: It's increasingly obvious that Obamacare's reliance on private health insurance was a mistake. Public health care programs such as the VA, Medicare, and Medicaid are much more cost-effective than private insurance.


Nothing is obvious, and your conclusions are wrong. You are looking at this from a way oversimplified and misleading perspective.

Medicare has low administrative costs. But that doesn't begin to account for the economics. How much cost is it shifting to the private market? With low administrative oversight comes increased fraud and overuse. This is a huge problem.

You haven't even scratched the surface of where the real costs of a health care system lie: the actual health care delivery. The insurance end of the system is relatively inconsequential.

For the umpteenth time, the countries around the world that have maximized government participation have tended to get poorer results. Single payer (medicare for all) is not an optimal system, even if it is better than pre-Obamacare America. The European countries have tested and tuned their systems, a mix of private and public is needed, we should pay attention to their experiences. Obamacare is a perfectly good starting point for a long reform process.
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Re: Health care cost projections

Postby rabble » Mon Nov 25, 2013 11:39 am

Huckleby wrote:The European countries have tested and tuned their systems, a mix of private and public is needed, we should pay attention to their experiences. Obamacare is a perfectly good starting point for a long reform process.

I haven't studied this so I yield to your research and I have a question. Is this mix of private and public based on the goal of efficient and cost effective treatment of every patient as opposed to our current one of first denying every request we can and then if we can't, use the cheapest treatment available?
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Re: Health care cost projections

Postby kurt_w » Mon Nov 25, 2013 12:36 pm

Huckleby wrote:
kurt_w wrote: But that is changing. In recent years, the rate of health spending growth has been falling:


rate of growth. A very deceptive statistic.


Huh?

A decade ago, costs of both private insurance and Medicare were rising at 5% per year. Now Medicare's costs are flat and private insurance is down to 1.5% per year.

A few years ago, analysts thought that in 2020 we'd be spending almost 6% of GDP on Medicaid + Medicare. Now they project that it'll be more like 5%. That's about a 15% drop in the cost of those programs.

Yes, the US still spends way too much on health care for what we get, but at least the numbers are starting to move in the right direction.

The primary reason health care spending has moderated is that the economy has been weak.


That is part of the reason, but only part. In general, health care economists now accept that decadal scale health care cost growth will be slower than previous projections, and slower than the past decade's.

For the umpteenth time, the countries around the world that have maximized government participation have tended to get poorer results. Single payer (medicare for all) is not an optimal system, even if it is better than pre-Obamacare America. The European countries have tested and tuned their systems, a mix of private and public is needed, we should pay attention to their experiences. Obamacare is a perfectly good starting point for a long reform process.


I don't think there is an "optimal system" but I think the evidence is clear that health care systems based on private insurance are consistently more expensive. Within the OECD, the US system is the most privatized and the most expensive. Switzerland's is the second-most privatized and is either second- or third-most expensive, depending on how you count.

I would say more about this but don't have a lot of time in the pre-Thanksgiving crunch here. This was probably the wrong day to start this thread.
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Re: Health care cost projections

Postby Huckleby » Mon Nov 25, 2013 3:08 pm

rabble wrote:Is this mix of private and public based on the goal of efficient and cost effective treatment of every patient as opposed to our current one of first denying every request we can and then if we can't, use the cheapest treatment available?

I think you are deeper into the weeds than I am able to go. I can't tell you exactly why other countries are delivering better value, I've forgotten the details.

When we are talking about a private/public mix, you're trying to get the best of both worlds. Private companies that compete for business, either in the market or through government contracts, tend to bring efficiency. But you want to regulate-out excessive profit.
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Re: Health care cost projections

Postby rabble » Mon Nov 25, 2013 3:17 pm

Huckleby wrote:When we are talking about a private/public mix, you're trying to get the best of both worlds. Private companies that compete for business, either in the market or through government contracts, tend to bring efficiency. But you want to regulate-out excessive profit.

I'm just saying that in our case, to do that we would have to shift the mindset of every insurance company and employee in the country. Even if they have the inclination I don't think they can undo all those years of conditioning without extreme regulation and oversight.
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Re: Health care cost projections

Postby Huckleby » Mon Nov 25, 2013 3:37 pm

kurt_w wrote: A few years ago, analysts thought that in 2020 we'd be spending almost 6% of GDP on Medicaid + Medicare. Now they project that it'll be more like 5%. That's about a 15% drop in the cost of those programs.

Not a drop in costs, a lowered projection for the increase in costs.

kurt_w wrote: Yes, the US still spends way too much on health care for what we get, but at least the numbers are starting to move in the right direction.

The numbers are less bad.

kurt_w wrote:
The primary reason health care spending has moderated is that the economy has been weak.


That is part of the reason, but only part. In general, health care economists now accept that decadal scale health care cost growth will be slower than previous projections, and slower than the past decade's.

That article doesn't address the issue, it just gives projections. The vague reference to Obamacare is flimsy speculation, the economics of Obamacare are largely unknown. The economy is why health care costs are moderating, and equally important, rising health care costs (especially deductibles) have priced people out of services.

kurt_w wrote: I don't think there is an "optimal system" but I think the evidence is clear that health care systems based on private insurance are consistently more expensive.

The most cost-effective system in the world is Japan, and they use private insurers.
The private/public line gets blurred because insurers can be heavily regulated.

kurt_w wrote:Within the OECD, the US system is the most privatized and the most expensive. Switzerland's is the second-most privatized and is either second- or third-most expensive, depending on how you count.

Switzerland is the most like Obamacare. I'd take Switzerlands complete system in a heartbeat. Ya, they are on pricey side, but a lot cheaper than the U.S. They also have very high tech medicine, and the shortest wait times in the world. It's not JUST about get the cheapest system.

When they talk about public/private mixes, the degree of private ownership of hospitals as well as insurance companies are generally considered. France is considered the most privatized health care system in Europe (if my memory is correct) and they are often cited as having the best health care system in the world.

The private/public argument really is pretty silly. You know, 60% of all health care bills in the United States are already paid by Uncle Sam.

Obamacare was designed to deliver most new coverage by expanding medicaid.

The mix is already on. "Single payer" in France just pays basic needs, most people have private insurance too.

the Dutch have abandoned single payer completely and moved to Obamacare-like system (for most people.)

The public-private socialism-capitalism arguments from both liberals and conservatives have really been a giant distraction.
Last edited by Huckleby on Mon Nov 25, 2013 3:41 pm, edited 1 time in total.
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Re: Health care cost projections

Postby Huckleby » Mon Nov 25, 2013 3:40 pm

rabble wrote: I'm just saying that in our case, to do that we would have to shift the mindset of every insurance company and employee in the country. Even if they have the inclination I don't think they can undo all those years of conditioning without extreme regulation and oversight.


Ya know what, I think it is going to be easy as pie. Insurance companies are getting a steady profit on the exchanges, they will be very happy to play nice. The old system wasn't very good for them

The Obamacare regulation is already quite good. It's mostly a matter of protecting the regulation from Republican improvements.
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Re: Health care cost projections

Postby Stella_Guru » Mon Nov 25, 2013 8:41 pm

Huckleby wrote:Ya know what, I think it is going to be easy as pie. Insurance companies are getting a steady profit on the exchanges, they will be very happy to play nice. The old system wasn't very good for them

I'm sure the CEO's from the six largest health insurers would agree as they received a total of $83.3 million in pay last year.
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Re: Health care cost projections

Postby Huckleby » Mon Nov 25, 2013 9:04 pm

$83.3M siphoned out of the health care system? I had no idea!

http://vimeo.com/19569910
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Re: Health care cost projections

Postby Rich Schultz » Tue Nov 26, 2013 2:49 am

Do you think those CEO's will make less under Obamacare?
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Re: Health care cost projections

Postby kurt_w » Tue Nov 26, 2013 8:28 am

Huckleby wrote:
kurt_w wrote: A few years ago, analysts thought that in 2020 we'd be spending almost 6% of GDP on Medicaid + Medicare. Now they project that it'll be more like 5%. That's about a 15% drop in the cost of those programs.

Not a drop in costs, a lowered projection for the increase in costs.


Oy. Someone is feeling pugnacious.

The point is that three years ago we thought we'd be paying $X for major federal health care programs in 2020. Now we expect to be paying $[0.85 * X]. That is good news.

kurt_w wrote: Yes, the US still spends way too much on health care for what we get, but at least the numbers are starting to move in the right direction.

The numbers are less bad.


Yes. The numbers are less bad, which is exactly the same as saying "the numbers are starting to move in the right direction" unless you think that the numbers should stay "just as bad" or possibly get "more bad".

Of course it would be nice if the numbers magically jumped from "very bad" to "great!" without passing through "less bad" on the way. In practice, most of the time, that doesn't happen.

Huckleby wrote:
kurt_w wrote: I don't think there is an "optimal system" but I think the evidence is clear that health care systems based on private insurance are consistently more expensive.

The most cost-effective system in the world is Japan, and they use private insurers.
The private/public line gets blurred because insurers can be heavily regulated.


I don't think it's possible to say that country X has the most cost effective system in the world. Yes, Japan's system produces pretty good results at low cost. And yes, it does partially rely on employer-sponsored private insurance -- but heavily regulated, far beyond what Obamacare involves.

On the other hand, look at Finland -- they spend 8.9% of GDP on health care (compared to 9.5% in Japan and 17.6% in the US) and have much higher public confidence in their health care system (88% in Finland, vs. 57% in Japan and 56% in the US). And both health insurance and health care in Finland are almost entirely public (there is a very small, supplemental private system).

My point isn't to argue over which country's health care finance and delivery systems are "best". Japan's certainly has been very good, and insofar as there are concerns about its future, they're mostly the consequence of broader demographic challenges involving a shrinking and aging population ... and those challenges would raise concerns for any health care system, public or private.


Huckleby wrote:
kurt_w wrote:Within the OECD, the US system is the most privatized and the most expensive. Switzerland's is the second-most privatized and is either second- or third-most expensive, depending on how you count.

Switzerland is the most like Obamacare. I'd take Switzerlands complete system in a heartbeat. Ya, they are on pricey side, but a lot cheaper than the U.S. They also have very high tech medicine, and the shortest wait times in the world. It's not JUST about get the cheapest system.


I agree with that ... though I'd also take Finland's system, or France's system, or a half-dozen others, in a heartbeat too.

Yes, Switzerland's system is very similar to Obamacare. It also is very popular (86% public confidence, compared to 56% in the US). And you could be right that given the current situation in the US, the most feasible "good" outcome would be to have Obamacare gradually evolve into a clone of the Swiss system. I suppose that's certainly easier to imagine than the US just wholesale adopting something completely different.

... UNLESS the Republicans somehow manage to torpedo Obamacare, either through the court system or Congress. If that happened, and we were thrown back into the totally unsatisfactory status quo ante, I can see people deciding that expanding Medicare into a universal health insurance program would be the only remaining option. We'd end up with a system of government funded health insurance coupled with private delivery of health care, or in other words something along the lines of:

Huckleby wrote:France is considered the most privatized health care system in Europe (if my memory is correct) and they are often cited as having the best health care system in the world.


Again, it's hard to say what's "best" but the French health care system is certainly very very good ... as evenlibertarians acknowledge when they're forced to personally choose between health care in the US and health care in France.
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Re: Health care cost projections

Postby Stella_Guru » Tue Nov 26, 2013 8:35 am

Rich Schultz wrote:Do you think those CEO's will make less under Obamacare?

Can high crankcase pressure be caused by worn piston rings?
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Re: Health care cost projections

Postby wack wack » Tue Nov 26, 2013 9:47 am

Huckleby wrote:The European countries have tested and tuned their systems, a mix of private and public is needed, we should pay attention to their experiences.


Experience, indeed.

This applies to everything, not just health care, and includes our own national experience as well as those of other nations. We largely ignore history and thus keep repeating mistakes.

For some reason in America, it is better to be true than to be honest.
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Re: Health care cost projections

Postby Huckleby » Tue Nov 26, 2013 9:58 am

kurt_w wrote: Yes. The numbers are less bad, which is exactly the same as saying "the numbers are starting to move in the right direction"

The right direction is for costs to go down, not just the rate of cost increases to moderate.

kurt_w wrote: I don't think it's possible to say that country X has the most cost effective system in the world. Yes, Japan's system produces pretty good results at low cost. And yes, it does partially rely on employer-sponsored private insurance -- but heavily regulated, far beyond what Obamacare involves.

Japan gets excellent outcomes, spends the least per person among developed countries, and allows private insurance companies to earn a profit by evaluating and paying claims.

kurt_w wrote:My point isn't to argue over which country's health care finance and delivery systems are "best".

Your point was direct and clear: public insurance is obviously more frugal both in the U.S. and abroad.

They say you can catch more flies with honey than vinegar. I say why the fuck does anybody want to catch flies? Besides, all I got is vinegar. I hope you will question your assumptions.

kurt_w wrote: thrown back into the totally unsatisfactory status quo ante, I can see people deciding that expanding Medicare into a universal health insurance program would be the only remaining option.

Medicare-for-all is fine with me.

(BTW, I do not think Republicans would actually want to repeal Obamacare and own the consequences.)

The bottom line is that the insurance model really is not so important, its importance is wildly exaggerated in the minds of people who see the world through the lens of socialism vrs. capitalism. Single payer can be made to work, private insurance works fine with sensible regulation.
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