How to expand the health care dollar

In the last 30 years health care spending has gone up by almost 30 times, to an unmanageable 2.6 trillions dollars today. Such economic burden is as unbearable as it is outrageous.

What drives health care costs? Where does all that money go?

Here is a breakdown of the health care dollar. Apparently as it turns out, most of the health care dollar goes in patient hospitalisation and physician services.

If we were able to cut down on health care expenditures to half- which would still be at the OECD expenditure average- we would save enough to wipe out the entire federal budget deficit at one fell sweep. However with the kind of political and social climate that exists in the country today, any attempt at a responsible debate on health care is met with a dogged head-in-the-sand rhetoric.

As someone eminently enlightened painfully suggested a while ago, it may require a force of inevitability for the country to change course and do a radical rethink on health care expenses. Any change will have to be forced by an eventuality like a demoralising depression or insolvency to force people to understand that continuing as usual is not possible.

As a fore thought, where could all these cuts come from?.

The chart above easily explains where the cuts must come from: hospital costs, and associated costs  will follow on the way down. And although drugs and device costs appear to be smaller percentage of the pie above, considering that they are a rather minuscule component of health care services delivery,  their relative contribution to the cost are larger. And worse off, such costs are escalating beyond control faster than any other cost group.

Furthermore, as patterns of illnesses change from short term, acute illnesses to chronic illnesses that tend to linger on, the role of hospitals in treating these have to be re-evaluated. Are chronic conditions like heart failure really managed well in the hospital every fifteen days that there is an increase in severity, or can they be managed well enough in the community? That would ensure a much lesser cost to the health care system, and a much better care experience for the patient as well.

A lot of the care that is provided in the hospital is wasteful and inappropriate; the reason is the american hospital industry is geared toward demand creation, not meeting appropriate demand. And when it comes to health care, where the provider himself can often define what demand is, creating demand for services is not a terribly hard thing to do. Furthermore, even when the provider does not benefit financially with this artificial creation of demand, the legal environment in which we operate, heavily encourages unnecessary service utilisation.

To top it all, there is hardly any incentive or reason, neither to the consumer, nor to the care provider, to utilise less services and bring the costs down.

Therein is a recipe for a perfect disaster, a colossus of spending, an all sucking financial black hole is formed right there.


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