Tuesday, January 10, 2006

Trillions and Trillions

The Centers for Medicare and Medicaid Services (CMS) actuaries have released their annual report on national health care spending. First, I have bad news. This work, which was paid for by you, the taxpayers, and conducted by federal employees on behalf of your federal government, is not available for you to read unless you happen to subscribe to the journal Health Affairs, which costs $122 a year. CMS issued a press release about this, and then directed people to Health Affairs if they want to read it. So you rabble, wretched refuse, and little people can read the abstract only, here. But you'll have to depend on me to tell you what it actually says.

Oh, and now I suppose you were expecting the good news? Well, the article title, and all of the news coverage that depends on transcription of the CMS press release, emphasizes that spending "slowed" from 2003 to 2004. Actually, it increased by more than the overall growth of the economy, as it always does, but just not by much as it has in the past couple of years.*

Specifically, what they call National Health Expenditures (NHE -- which doesn't include public health, not that it would matter because it's so little) constituted 7.2% of GDP in 1970, 9.1% in 1980, 13.8% from 1993 to 2000 (the era of managed care, which temporarily restrained spending), and 16% in 2004. That's called "slowing" because it's only a .1% increase from 2003. The reason for the "slowing" (by which they actually mean reduced acceleration) is mostly that insurers are trying to steer patients and doctors to more generic and fewer brand name drugs; and the collapse of the market for expensive Cox-2 inhibitors. Otherwise, however, spending on hospitals and physician services just kept on rising without stopping for breath. By the way, it's just a number, but the total NHE in 2004 was $1,877,600,000,000. Yup, that's almost $2 trillion, which we should easily have hit in 2005.

Of this, the share spent by government at all levels was $847,300,000,000, or a somewhat less than half. However, the rate of government spending increased by more -- 8.2% -- than the increase in private spending -- 7.6%. But this 8.2% was a composite of the increase in Medicare spending (8.9%) federal Medicaid spending (6.6%) other federal (9.1% -- which includes the Supplemental Children's Health Insurance Program, VA and military, federal employees, etc.), state Medicaid (10%) and other state and local (6.1%), so as you can see the share of health care borne by various programs and units of government is shifting.

As for where the money is being spent, as I said, growth in spending on drugs slowed a bit, while spending on hospital care accelerated, to an 8.6% increase, and spending on physician service also acclerated, to a 9% increase. This is mostly because people are using more services, and more costly services. And by the way, spending on nursing home care grew much more slowly, at 4.3%, which helped contain what would have otherwise been a larger increase in overall Medicaid spending. (Medicaid pays for about 40% of all Skilled Nursing Facility costs.)

So the aging of the population contributes only a small amount to these inexorable increases. The main reasons? New medical treatments -- once they're available, everybody (with insurance) has to have them; rising prices; and increasing utilization. The reasons for the latter aren't entirely clear but the growing chronic disease burden -- of diabetes and heart disease, in particular -- probably has something to do with it.

As insurance premiums rise, more and more workers are forced off the roles of the insured. States have responded to the increasing burden of Medicaid by restricting eligibility and services as well. So the more we spend, the more inequality we create. Fewer and fewer people are the beneficiaries (or the victims, in some cases) of more and more spending. It has to end somewhere, but that end is not yet in sight.

*They aren't terribly specific about their data sources, but IMHO these estimates are pretty accurate.

Addendum: Here's a good link from our friend Keeping Eyes Open, which discusses the growth of health care spending in context, along with some recommendations for what to do about it.

9 Comments:

Blogger Blake said...

Excellent analysis Cervantes-Yup- we're probablt at 2 Trillion dollars in 05.And you are correct about growing health access and delivery gap.Also correct about growing chronic disease burden.I am appalled at adult Obesity/Diabetes epidemics and US childhhod obesity represent our future costs. Why patients need anything new and expensive?- I'm not sure either? Personally I don't "trust anything under 30" to flip a phrase from the 60s :)

12:39 PM  
Blogger Blake said...

Excellent analysis Cervantes-Yup- we're probablt at 2 Trillion dollars in 05.And you are correct about growing health access and delivery gap.Also correct about growing chronic disease burden.I am appalled at adult Obesity/Diabetes epidemics and US childhhod obesity represent our future costs. Why patients need anything new and expensive?- I'm not sure either? Personally I don't "trust anything under 30" to flip a phrase from the 60s :)

12:42 PM  
Blogger Blake said...

Excellent analysis Cervantes-Yup- we're probablt at 2 Trillion dollars in 05.And you are correct about growing health access and delivery gap.Also correct about growing chronic disease burden.I am appalled at adult Obesity/Diabetes epidemics and US childhhod obesity represent our future costs. Why patients need anything new and expensive?- I'm not sure either? Personally I don't "trust anything under 30" to flip a phrase from the 60s :)

12:44 PM  
Anonymous C. Corax said...

I guess it's old news, but I only recently heard about how states are trying to force SprawlMart to provide better health coverage for its employees. The news story I heard had a brief quote from a SprawlMart saying words to the effect of, "We provide health care to 1 million of our employees." I don't recall how many they said...I think it was one million...so the next morning on the bus, I asked the guy who works at SprawlMart about his coverage. He said he does have coverage. For routine stuff, such as an annual checkup, he isn't covered. SprawlMart will kindly cover 80% if he has something catastrophic, such as a car accident. I forgot to ask if they cover cancer treatment.

I don't imagine that too many people could cover 20% of even a brief hospital stay--never mind physical therapy afterwards--with their SprawlMart paychecks. Any meager savings they might have would be gone. If they're too injured to return to work? If they cannot afford the 20% share? If they can return to work, but are still in too much pain to be on their feet all day, or to lift stuff and so can no longer do their original job? How long before they end up on the public assistance?

This is the healthcare model of "the greatest country in history" (as Mario Cuomo used to always refer to the U.S. on The Capitol Connection). Not universal health care, but corporate health neglect.

4:34 PM  
Anonymous keeping eyes open said...

Lots of good points, Cervantes -- incl. your crit. that gov't analysts' main article is on a pay-only website. But actually most of the data -- or more -- and many of same graphs/tables, plus a little descriptive text, are on this gov't website:
http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp#TopOfPage

(Or look at CMS.gov, under Research/Statistics, then under
National Health Expenditure Data.)

You hit many other important issues, too -- and it's good to see this site growing!

I'd like to offer one other link and one small correction...
The overall category, "Nat'l health expenditures," DOES include "gov't public health activities" -- like flu-shot programs, state agencies that oversee health care quality, etc. A sadly small share of total -- and doesn't measure lots of things that might be called public health activities, such as pollution control programs. (For data mavens, "personal health care expenditures" are the #s that exclude spending on pub health, and on med research, and on the WILDLY growing category that counts $ used to administer private/public health coverage, AND the profit $ of health insurance companies.)

After last year's #s were touted with the same "slowing" you aptly critique, our project wrote a rpt that might interest some here--despite long-winded title:

Health Costs Absorb One-Quarter of Economic Growth, 2000-5-- Recent Federal Report Unintentionally Obscures Massive Rise, Physicians' Decisions Key to Controlling Cost, 9 Feb 2005. To find it at www.healthreformprogram.org,scroll to the bottom of the USHR page.

We highlight vital role of MDs' decisions in cutting cost. Most $ go for the sickest people needing costly care (as a Kos thread has been discussing) -- not for the average person now being deterred from seeing their MDs because today's dangerous cost control mantra is, make patients pay more....

Since that report is long (like this comment -- sorry!), here's a short piece that covers some of the same ground -- http://www.tompaine.com/articles/shooting_at_the_wrong_target.php

Feedback welcome!

5:11 PM  
Anonymous keeping eyes open said...

Sorry my long links wouldn't work and I'm not savvy enuf to make them in html, but you actually can find the gov't data here:
cms.hhs.gov/NationalHealthExpendData/
Just scroll down for links to many parts of the data set.
And instead of the chopped off link for "Shooting at the Wrong Target" article, search on that title at TomPaine.com, or see it on our website, healthreformprogram.org, near bottom of the USHR page. Sorry!

5:17 PM  
Blogger Cervantes said...

Thanks KEO. The so-called National Health Expenditure does include some spending that we often think of as related to public health, as you say, such as giving flu shots outside of regular physician practice; but it does pertain exclusively to the medical institution and expenses associated with providing medical interventions to individuals. Public health, as you say, is far broader than that.

Thanks for the links, which I had not been able to find, I'll put them on the front page.

5:58 AM  
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12:18 AM  
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12:19 AM  

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