Medical Costs

Ever wonder why medical costs keep going up? There are several reasons.

First, there is a lot more medicine available than there used to be. I remember an ad running in the early 1970s where a boy says that he is dying of leukemia and asks people to donate to find a cure so that it will no longer be a death sentence. That day is here. Leukemia now has a high survival rate. While this is great news for people stricken with it, the treatments take 2-3 years depending on gender and age and involve lots of hospital visits. This is true for other cancers, also.

A lot of medicine is like this. Many conditions that used to be untreatable are now easily managed with pills or shots. This has increased our life expectancy by decades but there are costs.

Drug companies are constantly coming up with new drugs. Some are so specialized that they have to invent new problems for the drugs to solve (Restless Leg Syndrome). New drugs are expensive so the drug companies need to convince millions of people to use their products.

Then there is the cost of new equipment and the incentives to use it. A lot of the new equipment costs millions of dollars. Hospitals want to recover that cost by spreading it across as many patients as possible. If enough patients use it then new equipment can go from a cost to a profit center. Accordingly, there is pressure on doctors to have as many patients scanned as possible.

There are other pressures. Malpractice suits often start by looking at all possible tests that could have been performed. A doctor who didn't prescribe a test, no matter how unlikely, looks bad in court. This puts extra pressure on doctors to over-prescribe tests.

Then there is the malpractice insurance. This has been a problem for decades and it is getting worse. Doctors are retiring early because they cannot make a profit because of malpractice insurance and suits.

So far, Obamacare has not addressed these problems. It is focused on getting more people insured. In a speech yesterday, Obama said that malpractice reform is off the table.

Health care cost reform can be tricky. Right now hospitals charge for scanners on a per-use rate. This could be changed but the equipment still costs the same and the costs of purchasing it have to be recovered somehow. Other countries have addressed this by simply spending less money. This creates shortages and waiting lists.

The only real solution to reducing medical costs is to reduce coverage. Americans have come to expect high-quality health care but, between expanding coverage and expanding costs, the future will probably mean reduced care.