Boomers to challenge limitations of health care system

Consider the U.S. airline system. On one hand are the struggling mega-providers like United with flights everywhere, from Bismarck, N.D., to Boca Raton, Fla. Weighed down by inefficiencies built into an expansive network that tries to service everyone, United has filed for bankruptcy, eliminated pensions and cut salaries and benefits.

On the other hand are the smaller, niche players like America West, which saturate the most lucrative routes. In addition, there are the regional upstarts like Southwest Airlines, which doesn't bother with Bismarck, but reports higher revenue growth than the industry average by employing a smaller, younger and lower-salaried staff.

In place of the mega-carriers substitute county hospital systems that care for some of the sickest and lowest-income patients as well as the uninsured. For Southwest plug in an independent urgent-care system that doesn't take Medicare or Medicaid.

This is the careening-towards-disaster scenario posed by Stuart Altman, an economist and professor at Brandeis University who spoke at "Pathways to Change: Transforming American Healthcare in the Next Decade," a symposium sponsored by the W. P. Carey School of Business.

If only the most efficient health-care providers make it, a lot of people will lose out, Altman noted. And a health-care system based on taxpayer and employer-sponsored coverage won't survive if too many people fall through the cracks. "There's serious concern that we're already spending a lot on health care; will we or won't we want to spend more?" Altman continued.

Current trends show that the amount spent on health services and supplies, per capita, has doubled since 1990. The amount of American gross domestic product (GDP) spent on health care slightly more than doubled between 1970 and 2003. Altman pointed out that the "growth in health-care spending is dominated by hospital services."

From 1999 to 2003, the percentage of yearly medical spending increased most for hospitals — from 31 percent to 54 percent — while the percentage actually decreased for prescription drugs and physician services. (Note: These figures reflect spending growth, not just health-care spending. Overall costs for all three categories have grown).

"If current trends continue, a much greater proportion of our income will go towards health care," Altman explained. A key factor influencing costs in future could be the ubiquitous baby boomers, still far from elderly but heading into a time of life when health problems increase.

Altman pointed to studies indicating that "the net impact" of improving technology has, in the past, usually increased costs. Think MRI machines and replacement knee joints that actually swivel and electronic medical record systems. As the wave of baby boomers hits retirement and eventually segues into old age, presumably they will experience a growing number of conditions requiring doctor's care, hospitalization, prescription drugs, home care and outpatient services.

What ups the ante is that the baby boomers are "a very demanding group whose use of health care is growing faster than any other age group," Altman explained. Add together the challenges of serving the boomers, the increased costs of technological change and the plight of providers — the sum is a grim prognosis.

If the health-care system deteriorates past a certain point, Altman predicts that American consumers will force a change similar to the events of the early 1990s. As managed care reached fever pitch, consumers revolted, and legislators responded with a flurry of laws regulating providers.

Eventually insurers gave up and raised premiums instead of restricting care as tightly as that economic model required. This jacked up health-care costs even further. The bitter legacy is the distrust and resentment between patients, insurers and doctors that produced malpractice claims and lawsuits challenging coverage limitations.

"Patients wanted more and doctors wanted to give more but insurers prevented that. We'll see the same thing in the future if we try to hold back too much. There will be a political and economic backlash led by the baby boomers who are just entering their high-utilization years," Altman said.

At the same time, the third-party, employer-sponsored insurance system presumably will continue to crumble, he continued. For instance, employer-sponsored insurance of the "non-elderly" dropped almost 4 percent between 2000 and 2003, Altman said. Large firms with 1,000 or more workers did best at keeping health coverage in force, with just a 1.3 percent decrease during that period. In comparison, coverage through small companies employing fewer than 25 people fell 4.2 percent — more than three times the large-firm rate.

Fewer self-employed people have coverage, too, he noted. Almost all of those who lost coverage through work either signed up for Medicaid or simply went without insurance. Either option increases the eventual cost to taxpayers through government assistance or "charity care," mostly at public hospitals and clinics.

"The more pressure, the more cost-shifting, the higher the private premiums, and the more uninsured," Altman summed up.

Then there's Medicare, which may be an even bigger problem than decreasing employer-covered insurance. Forecasters have predicted that Medicare will go bankrupt anytime from 2019 to 2026. Taking Medicare, Medicaid and Social Security together, by 2030 the U.S. will have doubled the percentage of national income spent on health care just to get by, he said.

Other depressing statistics all point to cutbacks in government programs or reduced consumer health coverage. On the bright side, Altman said there are alternative scenarios that could derail the runaway health-care spending train:

  • Restructure employer-sponsored and government-funded programs so that consumers (patients) have a bigger role in decision-making and utilization
  • Return to what Altman calls "true managed care" focused on getting the most bang for a buck
  • Change to a "pay for performance" system — rather than today's "fee for service," which pays regardless of service quality — that rewards doctors, hospitals and other providers with the best patient outcomes and efficient bottom lines
  • Implement disease-management for diabetes, asthma, osteoarthritis and other chronic disease systemwide (which, for one thing, would decrease the number of these patients' trips to the emergency room)

Altman points to a fascinating study indicating that at a certain point, spending more money on some conditions doesn't improve the outcome, healthwise. It just wastes dollars that could be spent more productively elsewhere.

He believes that we spend too much — more than "the gold standard" — on health care by ordering too many expensive and unnecessary tests, over-drugging conditions that could be mitigated through lifestyle changes, and handling consumer dissatisfaction through malpractice claims, among other inefficiencies.

As he described it, "The gold standard is that you do everything you can do help people. But economists stop short at the economic optimum — past which you provide too much care, with lots of hospitalization, drugs you don't need or treatment that causes more problems."

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