Once Patients Pay, Health Costs Will Fall

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Why Health Care Reform Will Cost Taxpayers Dearly

In the most recent edition of the Journal of the American Enterprise Institute, Veronique de Rugy investigates how health care reform will “cost taxpayers more, much more.”

According to Congress, de Rugby explains, the different health care bills will cost approximately $900 billion over the next decade, yet somehow will simultaneously save taxpayers’ money in the long run.  Why does this sound familiar? Because the government has made similar arguments before.

Take Medicare, for instance. In 1967, long-run forecasts estimated that Medicare would cost about $12 billion by 1990. In reality, it cost $110 billion that year. Today, it costs $500 billion.

Moreover, based on Congressional Budget Office data, this chart below illustrates how long-term projections of Medicare spending have steadily increased, even in recent years and over short periods of time. In 2005 for example, CBO projected that Medicare would cost $1.5 trillion in 2050. Two years later, in 2007, the same CBO projected that this cost would reach $2.8 trillion. And in 2009, it projected that the cost would be $3 trillion instead. In other words, this projected cost doubled in four years.

This upward revision of projected costs comes despite CBO’s allowances for “excess cost growth,” meaning that CBO is aware that it tends to underestimate the long-term cost of programs, so it allows for some excess spending in its projections.

Furthermore, the actual expenditures exceed projections—in 2008, federal outlays for Medicare exceeded most recent projections by $63 billion; in 2009, federal outlays for Medicare exceeded projections by more than $148 billion.

Study: No evidence that computerization has lowered hospital costs

A new study published in the American Journal of Medicine looking at some of the America’s “most wired” hospital facilities found that computerization hasn’t saved hospitals money or improved administrative efficiency.

The study evaluated data from approximately 4,000 American hospitals over a four-year period and found that the high cost of installing and maintaining hospital computerization systems is greater then any anticipated cost savings. Moreover, most of the software written for use in hospitals is intended for administrative, not medical purposes.

The report concludes that while hospital computing might “modestly improve process measures of quality,” they do not reduce administrative or over-all costs.

Gallop: 80% of Americans Satisfied with Own Health Care

Accroding to Gallup:

Americans are broadly satisfied with the quality of their own medical care and healthcare costs, but of the two, satisfaction with costs lags. Overall, 80% are satisfied with the quality of medical care available to them, including 39% who are very satisfied. Sixty-one percent are satisfied with the cost of their medical care, including 20% who are very satisfied.

Young Adults Will Pay Steep Price for Health Reform

Newser reports:

Young adults are the demographic most firmly behind President Obama and health care reform, but they may also end up funding a disproportionate share of it, the Washington Post reports. Requiring young adults to sign up for health insurance is a key part of reform plans, as it will ensure low-cost additions to the insurance pool who will effectively subsidize their older, sicker counterparts.

The reforms will help the estimated 10 million uninsured Americans aged 19 to 26 find inexpensive plans, but many of them—dubbed the “young invincibles” by insurance firms—have decided that they either don’t need insurance or would rather spend the cash elsewhere. All the plans on the table require all adults to sign up for at least minimal coverage, meaning health insurance is likely to become a significant new expense for many under-30s—assuming they don’t just opt to pay a penalty for not having it. With proposed penalties set at $750 or $950, that may be less than the cheapest plan’s price tag.

Milton Friedman on the Rising Cost of Health Care

Below is an excerpt from a 1978 lecture by Milton Friedman on the rising cost of health care delivered at the Mayo Clinic in Minnesota. His timeless insights are as true today as they were thirty years ago:

Click here to view Milton Friedman on government’s health care role.

HT: Carpe Diem

Where are Healthcare Costs Rising the Fastest?

From BusinessWeek:

(Click to enlarge)

Flawed Logic on Health Care

Warren Meyer makes an excellent point on health care. Many in the left point to the chart below as evidence that the US needs government-run health care since Americans spend more per capita on health care than anywhere in the “civilized” world:

This logic, he explains, is very compelling yet flawed. Consider the fact that Americans spend more money on cars than any other country:

Should that mean that the US needs a government-run automotive sector?

Government Health Care Costs Often Exceed Expectations

Below are several inaccurate forecasts of first year costs for government-run health care programs:

(Click to enlarge)

HT: John Goodman’s Health Policy Blog

Nobel laureate Ken Arrow on the Increasing Cost of Healthcare

The Nobel laureate Ken Arrow:

Oh, why health costs increase? The basic reason why health costs increased is that health care is a good thing! Because today there is a lot more you can do! Consider all these expenses that are diagnostic. Cat scans, X-rays, MRIs and now the proton-powered whatever-it-is. Something that is the size of a football field, cost $50 million, and has all sorts of diagnostic powers. A lot of these technologies clearly reveal things that would not be revealed otherwise. There’s no question about it. Diagnostics have improved. Technology has improved. You know, sending things through your blood stream to help in operations, instead of cutting you open. It’s incredible. But these things are costly. But for older people longevity is increasing by a month each year. Now, whether that creates other problems with retirement and social security is another question. But, nevertheless, preserving life is a good thing.

HT: Greg Mankiw