Monday, January 17, 2011

Demographics Drive Health Care Costs Up

It is impossible to stop rising health care costs without cutting treatment. We can slow the growth of costs with competition and innovation, but the primary cost driver is and will remain the amount of medical treatment provided on a per capita basis.

People today see doctors more frequently than people did in prior generations, and they’re increasingly likely to get expensive, cutting edge tests and therapies that were not in existence a generation ago. Once they leave the doctor’s office, today’s patients are medicated with more drugs than ever before, and at much higher costs. And because they get all this expensive care, people live longer than ever before, reaching ages at which they require constant medication and treatment.

In a rapidly growing society, such as America after World War II, such increases in the amount of medical treatment provided may be sustainable since there are many healthy, young workers bringing down the average cost of insurance, be it public or private. In a stable or shrinking society, however, the rapid increase in treatment leads to rapid increases in the per capita cost of insurance. There simply are not enough healthy, young workers buying into group health insurance plans to offset the hordes of baby boomers on blood pressure medication, getting MRIs, having heart surgeries, or receiving diabetes treatment, etc. And so, each year the cost of a health plan goes up in proportion to the increased amount of care provided. Unless we cut back the amount of medical care, there is no way to stop the rise of health care costs. So what can be done?

In the 70s sci-fi movie “Logan’s Run,” a futuristic indoor city manages its population by putting everyone to death at age 30. That keeps the population from overgrowing the city, and would obviously prevent a lot of costs associated with an aging population. The idea of eliminating people at 30 is a bit naïve, though, since that leaves barely a decade of productive labor after two decades of expensive child rearing. Basing acceptable longevity on economic value, age 50 seems a more sound cutoff.

Of course, it’s hard to imagine we’ll ever reach a point where we’d implement such a horrifying policy. Rather, harsh economic realities will make the choice of life or death for us. Total life expectancy will decline as rationing leads to higher infant mortality, fewer preventive treatments, and deaths of people whose drug benefits are cut off, or who are too far down the waiting list for diagnostic tests, surgeries, etc. And eventually, enough older patients will die that the growth in medical costs will abate.

Other than death, only two things may stop the increasing per capita cost of medical care – a dramatic technological breakthrough, or lots of babies.

In terms of technology, it’s possible that science may find ever cheaper ways to provide the same or better treatments than we have today. Or perhaps we will discover cures for such maladies as cancer, diabetes, Alzheimer's, and other diseases that now require expensive treatment and drugs. Personally, I suspect that each technological breakthrough is likely to increase the cost of care, though. After all, once we eliminate each cause of death, we only push up life expectancy and force nature to find new ways to kill us – something nature seems very intent upon doing. New conditions become the leading cause of death, and we in turn search for new treatments and drugs to combat those. Until man becomes immortal, the cycle seems unlikely to end.

Making lots of babies, on the other hand, is a practical solution we can implement with a high degree of certainly for success – not to mention a good bit of fun. If each woman has an average of two children, that is not quite enough to maintain a stable population, owing to mortality prior to child bearing. To grow the population, and hence the number of young, healthy workers offsetting the expense of caring for older folks, women need to have an average of at least three children each. And really, four or five would be optimal. We’d still need to scale back certain entitlement programs, such as Social Security and Medicare, that need six or seven healthy workers for every beneficiary. But with a moderately growing population, at least we could continue to have such programs to care for the aged and infirm.

None of this is an argument to do nothing about the cost of health care. We can and should take measures to control the costs we can control so as to buy time before the day of medical treatment reckoning – the day we have to start cutting back on care because we have no other choice. We should allow a free market in health care, introducing competition into what has long been a closed, controlled system low on choice and high on expense. That means allowing insurance providers to create a multitude of competing plan options, and allowing them to sell these competing options across state lines. It also means requiring care providers to operate transparently, posting prices for treatments up front so as to allow consumers to shop around. And finally, it means opening up the medical professions to competition. Why should a person be required to complete medical school to set a broken bone or dress a wound? Military medics with months rather years of training have been doing these basic tasks effectively for centuries, freeing up doctors and nurses for more critical care. If we make doctors and clinics compete to be our care providers, we’re likely to receive better treatment and lower costs.

Still, each person’s health care costs, either directly paid to providers or to insurance companies, will continue to rise as long as fewer healthy workers are being asked to carry the load for more and more sickly ones who needs lots of care. Everything we do without addressing that essential fact is only tinkering around the edges of the issue.