Map of life expectancy at birth from Global Education Project.

Thursday, February 28, 2008

It's not as if they can predict the weather . . .

But they do try to predict health care costs ten years out. You may have seen a news brief about the new prediction that health care spending will be 19.5% of GDP by 2017. Health Affairs has made this open access, so go for it if you are turned on by wonkery.

Now, there are a lot of assumptions that go into any such prediction, and it's pretty obvious that unless the McCain campaign succeeds in its increasingly transparent plan to make voters believe that Barack Obama is a secret muslim extremist who has been planted by al Qaeda to turn the country over to Islamofascist infiltrators and give Tomahawk cruise missiles to Hamas,* some of those assumptions will be overturned somehow some way, and they probably won't all work out anyway. But, for what it's worth, the broad outlines of what these perpetrators of deep wonkery expect assuming that nothing major changes are as follows.

The biggest contributor to rising health care costs will continue to be increases in medical prices. We get a bit of a break for a couple of years thanks to some SSRIs going off patent (no prediction that fewer prescriptions will be written, however), and other drugs going generic, but that isn't expected to last. Physicians' incomes have been squeezed lately, but the authors predict that Congress will top ratcheting down their Medicare reimbursements and the shortage of primary care docs is bound to push up their incomes at some point. Utilization will continue to increase -- in other words, more drugs and procedures being done to more people, but not necessarily more people having basic access -- and that's the second biggest contributor. Contrary to popular belief, the aging of the population will have a relatively very small effect, although it will start to shift more people onto Medicare from other payers by the end of the period.

Now, there is an argument swimming around in the zeitgeist from certain conservative quarters which says, so what? Over the decades, the relative share of national income spent on various categories of goods and services has changed. Food used to be a big slice of our income, now it's just a few percent. We spend more on education, housing, and stuff that never existed before like cars and computers and i-pods than we did in 1900, and that's good. If we're spending more on health care, that's because we want more of it, and aren't we lucky to have the money?

But it doesn't actually work that way. The truth is that workers' real incomes have been stagnant for decades, which means that this medical inflation is coming out of other stuff that they want and need. Since food and energy prices are also going up, it's just squeezing people's stagnant incomes more and more. And we aren't getting more for our money -- most of this is just price inflation, running ahead of overall inflation, and a lot, if not all, of the increased utilization isn't buying us better health. Again, all you have to do is make the international comparison and that flat out proves the case. If Europeans and Canadians can spend half to, at most, two thirds as much, and the gap is widening, and they are healthier than we are and more satisfied with their health care, all of which are incontrovertibly true, then there must be something good about creeping socialism after all.

We're going to have to spend the next 20 or 30 or 50 years paying for the invasion of Iraq, the tax cuts for the very rich, and the ongoing massive military buildup apparently intended to fight the Soviet Union which is going to travel from 1990 into the future and attack us in 2015 using weapons it obtained from an earlier trip to 2050. Oh yeah, we're going to have to pay for the consequences of declining world oil extraction, decaying national infrastructure, and the consequences of global climate change. We can't afford to pay 25% more for health care at the same time.

*I have it on good information that Barack Obama has fathered a black child.

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