Health Care Costs: A Primer
P.L. 111-148, The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152), collectively known as the Affordable Care Act, or the ACA.
Congressional Budget Office, CBO’s 2011 Long-Term Budget Outlook, June 2011, p.ix, http://www.cbo.gov/ftpdocs/122xx/doc12212/06-21-Long-Term_Budget_Outlook.pdf.
See, e.g., A Roadmap for America’s Future, Rep. Paul Ryan, introduced as H.R. 4529, January 27, 2010, http://www.roadmap.republicans.budget.house.gov/; Pew Economic Policy Group, No Silver Bullet, Paths for Reducing the Federal Debt, September 2010, http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Economic_Mobility/Pew_DebtReport_Final.pdf?n=626 and The Peterson-Pew Commission on Budget Reform, Getting Back in the Black, November 2010, http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Economic_Mobility/Peterson-Pew_report_federal_budget_process_reform.pdf ; and The National Commission on Fiscal Responsibility and Reform, The Moment of Truth, December 2010, http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf ; and http://www.fiscalcommission.gov/.
U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, “NHE Projections 2010-2020,” August 2011, https://www.cms.gov/NationalHealthExpendData/03_NationalHealthAccountsProjected.asp#TopOfPage.
National Health Expenditure Projections, 2010-2020, https://www.cms.gov/NationalHealthExpendData/downloads/proj2010.pdf.
Anne B. Martin et al., “Growth in US Health Spending Remained Slow in 2010; Health Share of Gross Domestic Product was Unchanged from 2009,” Health Affairs, 31, no.1 (2012), p.1.
Kaiser Family Foundation, “The Economy and Medical Care,” November 15, 2011, http://healthreform.kff.org/notes-on-health-insurance-and-reform/2011/november/the-economy-and-medical-care.aspx.
We report OECD data for the United States where the comparison to other countries is of interest. Note that accounting for national health expenditures used by the OECD and CMS are largely but not entirely in accordance. For example, CMS accounting of national health spending includes the value of health-related research whereas OECD-reported data exclude this amount. Further, OECD accounting makes adjustments for the export and import of health services while CMS does not. For more information, see: Eva Orosz, “The OECD System of Health Accounts and the US National Health Account: Improving Connections through Shared Experiences,” draft paper prepared for the conference “Adapting National Health Expenditure Accounting to a Changing Health Care Environment,” Centers for Medicare & Medicaid Services, April 2005, http://www.cms.hhs.gov/NationalHealthExpendData/downloads/confpaperorosz.pdf.
OECD Health Data: Health expenditure and financing, OECD Health Statistics online subscription database, accessed 1/19/12.
World Health Organization, Global Health Observatory, http://www.who.int/gho/en/; Urban Institute, E. Docteur and R. Berensen, How Does the Quality of US Health Care Compare Internationally? August 2009, http://www.urban.org/uploadedpdf/411947_ushealthcare_quality.pdf; David Squires, Multinational Comparisons of Health Systems Data, 2011, The Commonwealth Fund, December 2011, http://www.commonwealthfund.org/Publications/Chartbooks/2011/Dec/Multinational-Comparisons-of-Health-Data-2011.aspx; 2011 Commonwealth Fund International Health Policy Survey, November 2011, http://www.commonwealthfund.org/Surveys/2011/Nov/2011-International-Survey.aspx; McKinsey Global Institute, “Accounting for the Cost of US Health Care: Pre-reform Trends and the Impact of the Recession,” December 2011, http://healthreform.mckinsey.com/Home/Insights/ Latest_thinking/ Accounting_for_the_cost_of_US_health_care.aspx.
David A. Squires, Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality, The Commonwealth Fund, May 3, 2012, http://www.commonwealthfund.org/Publications/Issue-Briefs/2012/May/High-Health-Care-Spending.aspx.
The source for this information is the Medical Expenditure Panel Survey (MEPS), Household Component, conducted by the Agency for Health Care Research and Quality, U.S. Department of Health and Human Services. The survey collects information on the U.S. civilian, noninstitutionalized population. Spending for people in the military or in longer-stay institutions, such as nursing homes, is not included in the totals or the spending distributions calculated from the survey. This means that some of the spending that is measured by the National Health Expenditures Accounts, which is the data source for the national total and per capita spending discussed above, is not accounted for in the tables based on MEPS.
Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, “National Health Expenditures 2010 Highlights,” https://www.cms.gov/NationalHealthExpendData/downloads/highlights.pdf .
Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, “National Health Expenditures 2010: Sponsor Highlights,” https://www.cms.gov/NationalHealthExpendData/downloads/sponsors.pdf.
Kaiser Family Foundation, Kaiser Health Tracking Poll, August 10-15, 2011, pp.16-18, http://www.kff.org/kaiserpolls/upload/8217-T.pdf.
Kaiser Family Foundation, Kaiser Health Tracking Poll, June 2010, p. 25, http://www.kff.org/kaiserpolls/upload/8082-T.pdf.
Kaiser Family Foundation, Kaiser Health Tracking Poll, September 2011, p.11, http://www.kff.org/kaiserpolls/upload/8230-T.pdf.
Anna Sommers and Peter J. Cunningham, Center for Studying Health System Change Tracking Report #28, “Medical Bill Problems Steady for U.S. Families, 2007-2010,” December 2011, http://www.hschange.com/CONTENT/1268/.
David. I.. Auerbach and Arthur L. Kellermann, “A Decade of Health Care Cost Growth has Wiped Out Real Income Gains for an Average US Family, “ Health Affairs, 30:9, pp. 1630-1663, September 2011.
Kathleen Short, U.S. Census Bureau, “The Research Supplemental Poverty Measure: 2010,” November, 2011, http://www.census.gov/hhes/povmeas/methodology/supplemental/research/Short_ResearchSPM2010.pdf.
Kaiser Commission on Medicaid and the Uninsured, Performing Under Pressure: Annual Findings of a 50-State Survey of Eligibility, Enrollment, Renewal, and Cost Sharing Practices in Medicaid and CHIP, 2011-2012, January 2012, p.11, http://www.kff.org/medicaid/upload/8272.pdf.
U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, National Health Expenditure Projections 2010-2020, July 2011, https://www.cms.gov/NationalHealthExpendData/03_NationalHealthAccountsProjected.asp#TopOfPage.
See McKinsey Center for U.S. Health System Reform, Accounting for the cost of U.S. Health Care, December 2011, http://healthreform.mckinsey.com/Home/Insights/Latest_thinking/Accounting_for_the_cost_of_US_health_care.aspx; Anne Martin et al., “Recession Contributes to Slowest Annual Rate of Increase in Health Spending in Five Decades,” Health Affairs, vol. 30, no. 1, January 2011, pp. 11-22; Henry J. Aaron and Paul B. Ginsburg, “Is Health Spending Excessive? If So, What Can We Do About It? Health Affairs, September-October 2009, pp. 1260-1275; Michael E. Chernew et al., “Increased Spending on Health Care: Long-Term Implications for the Nation,” Health Affairs, vo. 28, no. 5, September/October 2009, pp.1253-1255; Paul B. Ginsburg, Robert Wood Johnson Foundation, High and Rising Health Care Costs: Demystifying U.S. Health Care Spending, Research Synthesis Report No. 16, October 2008, http://www.rwjf.org/healthreform/product.jsp?id=35368;.
Joseph P. Newhouse, “Medical Care Costs: How Much Welfare Loss?” The Journal of Economic Perspectives, vol. 6, no. 3, 1992, pp. 3-21; Chris L. Peterson and Rachel Burton, Congressional Research Service, U.S. Health Care Spending: Comparison with Other OECD Countries, September 17, 2007; Chapin White, “Health Care Spending Growth: How Different is the United States from the Rest of the OECD?” Health Affairs, January/February 2007, pp. 154-161.
Ibid. Sheila Smith, Joseph P. Newhouse, Mark S. Freeland, “Income, Insurance, And Technology: Why Does Health Spending Outpace Economic Growth? Health Affairs, September-October 2009, pp. 1276-1284; Richard A. Rettig, “Medical Innovation Duels Cost Containment,” Health Affairs, vol. 13, no. 3, 1994, pp. 7-27; Kaiser Family Foundation, How Changes in Medical Technology Affect Health Care Costs, March 2007, http://www.kff.org/insurance/snapshot/chcm030807oth.cfm; Congressional Budget Office, Technological Change and the Growth of Health Spending, January 2008, http://www.cbo.gov/doc.cfm?index=8947.
Bradley C. Strunk, Paul B. Ginsburg, and Michelle I. Banker, “The Effect Of Population Aging On Future Hospital Demand,” Health Affairs, vol. 25, no. 3, 2006, pp. w141-w149; Bradley C Strunk and Paul B. Ginsburg, Aging Plays a Limited Role in Health Care Cost Trends, Center for Studying Health System Change Data Bulletin No. 23, September 2002.
Kenneth E. Thorpe et al, “Chronic Conditions Account for Rise in Medicare Spending from 1987 to 2006,” Health Affairs, 29, no. 4, April 2010; Kenneth E. Thorpe et al., “The Rising Prevalence Of Treated Disease: Effects On Private Health Insurance Spending,” Health Affairs, Web Exclusive, June 27, 2005, pp. w5-317 - w5-325; Kenneth E. Thorpe et al., “Trends: The Impact of Obesity on Rising Medical Spending,” Health Affairs, Web Exclusive, October 20, 2004. On trends in mortality rates, see, e.g., David M. Cutler, Edward L. Glaeser, and Allison B. Rosen, “Is the U.S. Population Behaving Healthier?” National Bureau of Economic Research, NBER Working Paper No. 13013, April 2007, http://www.nber.org/papers/w13013 and David M. Cutler, Your Money or your Life: Strong Medicine for America’s Health Care System, (New York: Oxford University Press, 2004).
See, e.g., John F. Cogan, R. Glenn Hubbard, and Daniel Pl. Kessler, Evaluating Effect of Tax Preferences on Health Care Spending and Federal Revenues, National Bureau of Economic Research, NBER Working Paper No. 12733, December 2006, http://www.nber.org/papers/12733.; Newhouse, 1992; and Burton A. Weisbrod, “The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment,” Journal of Economic Literature, vol. 29, no. 2, 1991, pp. 523-552.
John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler, “Evaluating Effects of Tax Preferences on Health Care Spending and Federal Revenues,” National Bureau of Economic Research, NBER Working Paper No. 12733, December 2006, http://www.nber.org/papers/w12733.
Donald M. Berwick and Andrew D. Hackbarth, “Eliminating Waste in US Health Care,” JAMA, Online March 14, 2012, pp. E1-E4.
Robert Kelley, “Where Can $700 Billion in Waste be Cut Annually from the U.S. Healthcare System?” Thomson Reuters, October 2009 (http://www.factsforhealthcare.com/whitepaper/HealthcareWaste.pdf) and B. Kelley and R. Fabius, “A Path to Eliminating $3.6 Trillion in Wasteful Healthcare Spending,” Thomson Reuters, 2010 (http://thomsonreuters.com/content/healthcare/pdf/white_papers/path_eliminating_36_trillion ).
Choosing Wisely, ABIM Foundation (American Board of Internal Medicine), April 2012, http://choosingwisely.org/wp-content/uploads/2012/03/033012_Choosing-Wisely-National-Press-Rls-FINAL.pdf.
Ibid, Ginsburg, 2008.
Anne B. Martin et al., “Growth in US Health Spending Remained Slow in 2010; Health Share of Gross Domestic Product was Unchanged from 2009,” Health Affairs, vol. 31, no.1, pp. 208-219, January 2012.
Jesse W. Bradford et al., “Accounting for the Cost of U.S. Health Care,” McKinsey Center for U.S. Health System Reform, December 2011, http://healthreform.mckinsey.com/.
See various cost control options at John Holahan et al., “Containing the Growth of Spending in the U.S. Health System,” Urban Institute, October 2011, http://www.urban.org/uploadedpdf/412419-Containing-the-Growth-of-Spending-in-the-US-Health-System.pdf and Theodore Marmor, Jonathan Oberlander, Joseph White, “The Obama Administration’s Options for Health Care Cost Control: Hope Versus Reality,” Annals of Internal Medicine, April 2009, Vol. 150, No.7.
Congressional Research Service, Comparative Clinical Effectiveness and Cost-Effectiveness Research: Background, History, and Overview, October 15, 2007; Congressional Budget Office, Research on the Comparative Effectiveness of Medical Treatments: Issues and Options for an Expanded Federal Role, December 2007, http://www.cbo.gov/doc.cfm?index=8891; Marcial Velasco Garrido et al., Health Technology Assessment and Health Policy-making in Europe, European Observatory on Health Systems and Policies, 2008, http://www.euro.who.int/Document/E91922.pdf.
Peter R. Orszag, 2008.
NICE argued that, based on models of beta interferon’s potential long-term benefits, about which evidence was not widely available, the high cost of the treatment did not justify its inclusion into the national benefits formula.
See, e.g., Peter R. Orszag and Ezekiel J. Emanuel, “Health Care Reform and Cost Control,” The New England Journal of Medicine, August 12, 2010, pp. 601-603; David Cutler, “How Health Care Reform Must Bend The Cost Curve, “ Health Affairs, June 2010, pp. 1131-1135; Peter R. Orszag, “Following Doctor’s Orders,” Office of Management and Budget Blog Post, April 1, 2010, http://www.whitehouse.gov/omb/blog/10/04/01/Following-DoctorOrders; Office of the Actuary, Centers for Medicare & Medicaid Services, letter from Richard S. Foster, “Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” ” as Amended, April 22, 2010, https://www.cms.gov/ActuarialStudies/Downloads/PPACA_2010-04-22.pdf.
Anne B. Martin et al., Health Affairs, January 2012, p. 211.
In addition to uncertainty about economic projections, CBO states that the ACA “made broad changes to the nation’s health care and health insurance systems. There are great uncertainties surrounding the potential budgetary impacts of those changes because they require assumptions about an array of technical, behavioral, and economic factors.” See pp. 20-21 of The Budget and Economic Outlook: Fiscal Years 2011 to 2021, http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf.
For criticism of the tax treatment of employer-provided insurance, see John F. Cogan, R. Glenn Hubbard, Daniel P Kessler, Healthy, Wealthy, and Wise, The Hoover Institution Press. 2011, http://www.scribd.com/doc/48910486/Healthy-Wealthy-and-Wise-2nd-Edition-by-Cogan-Hubbard-Kessler and http://www.hoover.org/publications/defining-ideas/article/76796.
“Obesity Accounts for 21 Percent of U.S. Health Care Costs,” Newswise, April 9, 2012, http://www.newswise.com/articles/obesity-accounts-for-21-percent-of-u-s-health-care-costs.
Kenneth E. Thorpe, Lydia L. Ogden, and Katya Galactionova, “Chronic Conditions Account for Rise in Medicare Spending from 1986 to 2006,” Health Affairs, 29, no. 4, published online February 18, 2010, pp. 718-724.