URMC / Research / Research@URMC / November 2013 / U.S. Health Care: Are We Getting the Best Bang for Our Buck?

U.S. Health Care: Are We Getting the Best Bang for Our Buck?

health careA new study out today in the journal JAMA revisits the topic of whether or not the U.S. health care system – which now accounts for almost one-fifth of the nation’s economy – is delivering the best value in terms of health outcomes.  The paper also overturns several widely held beliefs about the factors responsible for growth in health care spending. 

URMC’s Ray Dorsey, M.D., M.B.A., and Benjamin George, M.P.H. helped author the study which tackled massive sets of data from both government and private sources to paint a vivid picture of trends in U.S. health care from 1980 to 2010. 

The study shows that:

  • In 2011, the U.S. health care industry – which includes payers, manufacturers, and providers – employed 15.7 percent (21 million people) of the national workforce, with expenditures of $2.7 trillion, or almost 18 percent of U.S. GDP – double the share of GDP in 1980;
  • With an average annual growth rate of 2.9 percent per year, health care expenditures increased faster the any other industry between 2000 and 2010;
  • Government funding for healthcare has increase from 31.1 percent in 1980 to 42.3 percent in 2011;
  • Health care costs have tripled in real terms over the past two decades; however, the average rate of increase has declined consistently since the mid-1970s and sharply over the last decade.

Despite the significant increase in resources devoted to health care, many measures of outcomes – including life expectancy at birth and survival rates for many diseases – show the U.S. trailing much of the rest of the developed world.

The study also contradicts several common assumptions about what factors are driving the growth health care expenditures. For example, since 2000:

  • The price of professional services, drugs and devices, and administrative costs, not demand for services or aging of the population, produced 91 percent of cost increases;
  • Personal out-of-pocket spending on insurance premiums and co-payments have declined from 23 percent to 11 percent;
  • While chronic illnesses account for 84 percent of health care expenditures, the majority of these costs are not associated with treating the elderly.  Chronic illness and trauma among individuals younger than 65 years account for about 66 percent of total U.S. expenditure.

The authors contend that reconciling the current system’s conflicting incentives, policies, interests, and expectations is the “chief challenge of the next decade” if the nation is going to achieve the integration and other changes necessary to improve outcomes and savings. 

You can read the full study at the JAMA website and a piece by Bloomberg Businessweek. 

Mark Michaud | 11/12/2013 | 2 comments


Alvin Steinberg
E mail address – alvins387@aol.com

This is a proposal that should appeal to Progressives and Conservatives. If enacted it would cut the cost of government, reduce expenses, save lives and keep people healthy.

The United States spends $2,800,000,000,000 for health care. By 2025 we expect to spend about $4,000,000,000,000.

The Federal Agency for Health Care Research and Quality claims that the medical utilization of the top 1% of patients is 21% of the medical expenditures. Five percent of the population uses 50% of the health care expenditures. The bottom 50% use only 2.8% of the health care expenditures.

That means that the top 1% of people uses $560,000,000,000 or $200,000 per person of health care. The top 5% of the population cost $1,350,000,000 or $88,000 per person in health care. Fifty percent spend only 2.8% of health care costs. That is under $500.00 per person for care which will come to about $75,000,000,000.

If all people could be put into the top 50% of the health care system current medical expenses, excluding expenditures such as Social Security Disability, food stamps, special transportation, etc. would go from $2,800,000,000,000 to $150,000,000,000. That would be a saving of about $2,650,000,000,000. Obviously that isn't practical in the near future. We can aim to reduce health care cost by bringing as many people as
possible into the 50% category or as close to it as possible.

By 2025 we will spend about $11,000,000,000 a day for health care. The figures given above don't include expenses such as Social Security Disability, welfare, special transportation for the disabled, food stamps, self paid home care, nursing home assistance, etc. That amounts to additional hundreds of billions of dollars yearly.

The primary reason for the large health care expense is that physicians can't cure chronic diseases unless they cut them out, burn them or poison them.

If a patient goes to a physician who is just starting his practice and has Diabetes, HIV, Asthma and Epilepsy and the doctor is afflicted with Rheumatoid Arthritis and Hypertension when the doctor is ready to retire, if the same patient is sitting in front of him, the patient will still have Diabetes, HIV, Asthma and Epilepsy. The physician will still have Rheumatoid Arthritis and Hypertension. Physicians cannot cure chronic diseases. The health care system only treats many diseases. We need cures. That is why we have large numbers of deaths and medical expenses.

What we need is more federal support for medical research. Only 17% of scientific research applications to the National Institutes of Health(NIH) are funded. At one time we funded 30% of the applicants. At that time people said that we were starving the research community of funding. The NIH gave approval to 80% of the applicants but only 30% were funded. The research capabilities are much greater today than they were at that time. We can accomplish a lot now that we couldn’t just a few years ago.

The government spends $39 billion dollars yearly for medical research and appropriates $69 billion dollars for military research and $17 billion dollars for space research. That is a total of $86 billion dollars for both space and military research. We should spend at least as much money for medical research as we spend for military and space research. Because of advances that were made over the last few years we have the potential to cure chronic diseases with adequate research support.

Senator Elizabeth Warren of Massachusetts wants to double the NIH budget.

Every two days about 9,300 US citizens die of the top nine diseases. That is about 3,000 more Americans than died in combat in Iraq and Afghanistan combined over the last 11 years. The soldiers who died are entitled to the highest honors. Over the next twenty years about 33,800,000 Americans are presently scheduled to die of the top nine diseases. More will be sick and die from other illnesses.

Research should be undertaken to discover why old people are very susceptible to illnesses and develop methods of making them more resistant. This will help save a lot of medical and social care money and keep the elderly healthier then they currently are. Many scientists say that this is possible.

Two trillion eight hundred billion dollars is presently spent yearly for health care in the
United States. That amounts to about $8,700 for every man woman and child. For a family of four it costs $34,800. According to the non partisan Congressional Budget Office it will go up to 25% of the Gross Domestic Product by 2025. That is only 12 years from now. That will bring the cost of medical care to over $50,000 for a family of four. (The economy is expected to grow 3% annually so the figures given above will be much higher). That is more money than tens of millions of families have after paying their taxes. It will bring the cost of health care to much more than $4 trillion dollars yearly. In addition disabled people often can't work and need welfare, Social Security Disability, home care, institutional care, food stamps and special transportation. This adds hundreds of billions of dollars to America’s expenses. The relative cost of greatly expanded medical research is only a pittance compared to the potential savings for health care and the increase in productivity of our workers. It is advisable to quantify the expenses of sickness.Of course the most important reason for doing the additional research is to save lives improve the health of our people.

There will be economic advantages to our Bio Medical research program which will go beyond medical assistance. Because of the Apollo program which allowed us to go to the moon during the 1960's we developed the integrated circuit, fuel cells, computer controlled machining, the Cat Scan, the MRI, Dialysis, etc. There were economic spin offs from the project. We can expect a lot of economic growth potential from the enabling technological development which will be part of our medical research imitative. It will help make us be more prosperous and better be able to compete in international trade. There are undoubtedly things that will be useful to the space program, military and find other uses.

Research America, the largest medical research organization in America, conducted dozens of medical research opinion surveys and found that in every survey the majority of people wanted the government to spend more for medical research.

It would be a good idea if an effort would be made to speak to congressional offices and possibly thr Presidential Office to recommend that a check off be put on the tax forms to allow people on a voluntary basis to donate money to the National Institutes of Health, which is the major medical research funding agency of the Federal Government to support medical research. Since it would be voluntary it would not be considered a tax.

Conservatives and others want to cut the cost of government and keep the government out of the lives of our people. Medical research can be a vehicle to help accomplish this.

Thank you,

Respectfully submitted,

Alvin Steinberg
12/30/2013 3:13:38 PM
For a country that spends the most money on health care in the world, we would foresee that U.S. will be among the leaders in not only innovation but also quality of care and positive health outcomes. But we know that this is not the case instead global health-care costs are rising rapidly and the quality of care seems to be not that good. Health care cost has transformed the system into a profit driven business, it seems that it all boils down to quantity and not quality at this time around. That's why majority of the people now seek affordable treatment abroad and to also get the best quality of health care.
12/17/2013 5:03:04 AM
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