Rising Costs: The Greatest Threat to Health Reform

By Mark A. Kelley, MD |9/21/17
Founder, HealthWeb Navigator

The main character in the popular film Groundhog Day is caught in a time loop where he must repeat the same day over and over again.

The U.S. Senate is now having its own “Groundhog Day” moment as it debates (yet again) a law to replace the Affordable Care Act. To add to the drama, Senator Bernie Sanders (I-Vt.) is promoting his single payer alternative popularly branded as “Medicare for All.” In a he raises many of the same points I raised in my previous post.

Meanwhile, the average person watches their health care costs spiral out of sight, something our elected officials seldom discuss. How did that happen? Who is to blame?

The answer is no one…and everyone. Human history is full of examples when humans exhausted their resources. This is believed to be the reason why Easter Island’s inhabitants disappeared, eradicated by their own unchecked “ecocide.”

In North America, humans wiped out 50% of the large animal population in the geologic blink of an eye. Of course no one planned these extinctions. But we humans seem to have trouble learning that excessive demand eventually devours resources.

We have the same problem when it comes to health care. Over the last 40 years, health care has become one of the most innovative and profitable sectors of our economy. However, its costs are now taking big bites from the budgets of government, industry, and private citizens.

Until recently, this toxic effect was hidden behind spectacular successes in medicine: new technologies and cures, improved public health, better quality of care, etc.

For businesses, the success has been equally impressive. Health care has been profitable for insurance companies, hospitals, device manufacturers, and the pharmaceutical industry. These sectors thrived because the government and employers could afford to pay the costs, very little of which was passed on to patients.

But those “good times” ended a decade ago when health costs pushed the U.S. auto industry into bankruptcy. After the Great Recession of 2008, most companies faced the same challenge and were forced to cut their health benefits to stay afloat.

As a result, employees now pay more for health care out of pocket, while the average worker’s income has flatlined. You don’t have to be a math major to figure out that health care will soon be too expensive for most people. Meanwhile, the big business of health care has shown few signs of slowing down. Nearly all companies remain profitable.

However, there are some cracks in the armor. The profits of some hospitals and systems have dropped off, and several have closed as a result. Physician incomes are stable, but the pressures of practice are becoming intolerable. Many physicians are suffering from burnout, causing them to leave practice.

Health care is a major sector of the economy, accounting for 17% of the GDP. It is a field with many powerful constituents who support—and wield substantial influence over—members of Congress. That fact alone makes legislative reform difficult.

How will change occur? Possibly, though not ideally, from America’s most common instrument of change—a national crisis.

Despite what many experts believe, health care is not “too big to fail.” It has few price controls and bears no resemblance to a free market. The industry cannot survive without employer and government subsidies. As a nation, we have become gluttons for health care that is inefficient and becoming prohibitively expensive. There is no clearer path toward extinction.

Left unchecked, healthcare prices will continue to rise. Unless those costs are subsidized or controlled, more consumers will choose to be uninsured and seek care in hospital emergency rooms, leaving other patients to foot the bill.

If employers retreat from health insurance, the consequences will be catastrophic. The uninsured will flood the country’s delivery system of doctors and hospitals. Without federal bailouts, the system will bleed itself dry and suffer a full-blown meltdown.

That may happen no matter what Congress decides in the coming months. If Congress reduces current federal subsidies, more Americans will find themselves instantly uninsured, triggering a political and financial crisis. But even if the subsidies survive, costs will continue to rise, eventually resulting in catastrophe for all.

Unwittingly, with health care we have created a game that the public simply cannot win. The time has come to change the rules in our favor.