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Trends, Costs  in Healthcare

Various Stats on Healthcare costs:

Business spending as a percent of wages and salaries:  rose from 7% to 10% from '87 to '07.

Household HC spending:  from 4.9% in '87 to 6% in '07. 

Gov HC spending as a % of Rev:   17% in 2000 up to 32 and then stable at 28% in 2007 – for Fed

20% rose to 24% in 2007 for State and Local.

 

Productivity Trends.   (THE ROBERT WOOD JOHNSON FOUNDATION)

Excerpt from High and rising health care costs:   Demystifying U.S. health care spending

The health care industry has many characteristics that would lead one to expect relatively small increases in productivity over time. For example, there tends to be little competition among providers on the basis of price.  Extensive third-party coverage dilutes consumer incentives to be price conscious, and benefit structures tend to offer little reward for choosing a low-priced provider.

 On the other hand, Medicare administered pricing likely increases incentives to be efficient in producing individual services or, in the case of hospitals, admissions. In a study for the Medicare Payment Advisory Commission, Lichtenberg (52) outlines a number of additional factors leading one to expect relatively low productivity growth in hospitals. These include high labor intensity, low investment in computers and software, and low investment in research and development, although one should raise the question of whether the latter two factors result from lack of incentives to increase productivity.

He notes that government statistics on constant dollar output and American Hospital Association data on full-time equivalent staff suggest productivity growth at less than half the rate of the general economy. Cutler and McClellan (20) note that from 1960 to 1999, the medical component of the Consumer Price Index exceeded the overall index by about 1.8 percentage points a year, suggesting either increasing market power on the part of medical providers or much lower rates of productivity increases.

They suggest that the gap is due to lack of adjustment for quality increases, arguing that a quality-adjusted index for treatments for the conditions examined in the study would show productivity gains exceeding those for the economy as a whole.

 

Motivations from the different sectors of Healthcare:

Pharma / Device “My job is innovation that helps people . . . it's up to the doctors to control use.”

Payers   “We want to pay for the right things there’s things, but there s little data…and our customers want us to control costs.”

Clinicians  “My job is doing everything I can to help my patient . . . if I say no to studies, I might get sued.” 

FDA   “Safety, not cost effectiveness, is my job.”

Consumer-Patient   “I want the best of everything. Don’t ask me to pay more.”