Bruce C. Vladeck, PhD, Professor of Health Policy at Mount Sinai School of Medicine and former Administrator of the Health Care Financing Administration (HCFA), has described the venture of forecasting healthcare costs over an extended period as “an enterprise in comparative fantasy.” The same holds true with relating how healthcare will be financed in the future. Following are some issues that might influence the state of healthcare over the next 10 years, and beyond.
Projecting Healthcare Costs
There are three basic types of assumptions to keep in mind when projecting healthcare costs in the future: 1) Demographic factors; 2) general economic trends; and 3) medical care cost trends. The latter include, for example, different rates of medical care and general cost inflation, as well as medical activity trends. Most experts believe that technology is the driving force behind the long-term rise of health care spending, and argue that the primary reason for the increase in the health sector’s share of the gross domestic product (GDP) over the past 30 years is technological change in medicine.
According to an article published in the January/February issue of Health Affairs, the national health expenditure is projected to total $2.2 trillion in 2008, growing at an average annual rate of 6.5 percent from 1997 levels. Three primary patterns of growth anticipated by the authors include: 1) Rising share of GDP devoted to health care at a rate of increase below that experienced for 1960-1992; 2) cyclical patterns of growth in private spending with accelerating growth for 1998-2001 and decelerating growth for 2002-2008; and 3) diverging patterns of growth in private and public spending for 1998-2002, as the implementation of the Balanced Budget Act (BBA) of 1997 restrains growth in Medicare spending.
The authors also point out that, for the private sector, slower growth reflects an increase in the projected growth in the uninsured population. The impact of continued innovation in strategies to restrain expansion in managed care costs is expected to reduce growth in health spending for both private- and public-sector payers.
The Future of Healthcare Spending
Following an unprecedented period of slow growth from 1993 to 1997, health care spending is expected to demand a rising share of economic resources (GDP) over the next 10 years. As this trend places renewed pressure on private- and public-sector payers, it will drive the search for an acceptable balance between costs and access to care.
The trade-off between rising costs and access to medical services will not be easy to resolve. The increasing difficulty in finding major cost savings that are acceptable to consumers, suggests that further changes in modes of financing and delivery in health care will be incremental, with parallel reductions in health spending growth relative to historical experience.
“Over the long haul,” said Victor Fuchs, a noted economist writing in the January/February 1999 issue of Health Affairs, “there is only one reliable way to slow spending growth of Medicare and that is to slow the growth of services to patients. Unfortunately, an increase in the government’s share of the bill for Medicare seems unlikely.” Indeed, and as Fuchs relates, even to maintain its current share, the government will have to raise taxes appreciably and make major cuts in other programs. If the growth of services continues at the same rate as in the past, health care for the elderly in 2020 will require 10 percent of GDP.
In the private sector, consumer preferences are now shifting toward less restrictive models of managed care–a trend expected to continue. However, it is assumed that in the future there will be a slowdown in the diffusion of cost-increasing medical technologies and a shift back to more restrictive forms of managed care.
Moreover, there will be an increasing use of financial incentives to foster more cost conscious behavior in the initial selection of health coverage and the purchase of medical services. It is anticipated that the trend toward declining private coverage will become increasingly pronounced over the next 10 years, causing the growing uninsured population to act as an additional restraint on long-term growth in insurance premium costs and reduce access to care.
A number of health policy analysts have argued that the current dependence of health insurance on employment should be severed or reduced, and the tax code modified accordingly. However, most employees prefer the current employer-based system to the prospect of navigating the free market to purchase health care coverage. This data calls into serious question the proposal that employers provide a defined contribution to health care as seen in Medical Savings Accounts.
Clearly, the future of health care financing is complex. Neurosurgeons must understand the rudiments of the discussion if they’re to prosper in the new millennium.