Increasing costs of healthcare

50 years of financial patterns in medicine

The long-term backdrop for cost increases, using a dollar tracked to 2020 (so what that feels like to your budget today), are enormous. In 2020 ($4124 billion) we spending 4.5x more than what we spent in 1985 ($922.6 billion), 2.1x what we spent in 2000 ($1945.2 billion), and 1.4x what we spent in 2010 ($2947.3 billion), when we passed the ACA. These are numbers I picked out for hitting near the lines, so when we as a country hit around 1 trillion, 2 trillion, 3 trillion, and 4 trillion (i.e., 4,000 billion).

Source: Peterson-KFF. How has U.S. spending on healthcare changed over time? [https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/]
Source: Peterson-KFF. How has U.S. spending on healthcare changed over time?

It’s dramatic, but to be equitable let’s also look at the increases over decades. Since the ACA was passed in 2010, we’ll look back and forward on the change of the decade.

What could be main drivers of the cost of healthcare increasing, in terms of gross movement? Population would be a key contributor: if there’s more of us, there will be more spending. Another key contributor could be overall access to money, giving people a foundation to support more healthcare.

Sources: Healthcare increases, [https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/]
Population increases, [https://www.census.gov/data/tables/time-series/dec/popchange-data-text.html]
Real Median household income, [https://fred.stlouisfed.org/series/MEHOINUSA672N#0]
Sources: Healthcare increases, Population increases, Real Median household income

Compared to the US population, the increased expenditure is still dramatic. Looking to the US Census data, sticking with the decades, and doing a very simple, raw increase doesn’t correlate to the cost increase.

The real median household income is also stagnant. The data only goes back to 1985, so we can’t include 1970 and 1980 in our raw increase. Even breaking it out by decade, it’s not that people have access to more money overall.

These are all big, cumulative numbers. The thing about big, cumulative numbers is that to skew heavily takes big shifts, and there is no nuance. It’s like we’re painting a spindle chair with a 6” brush: the paint is getting on there, but the nuance, definition, and detail is craptastic.

What can’t be anything less than plain is the color. Here, the color is the dramatic increase in healthcare cost compared to population increases, and a median income that very roughly makes sense against population and is overall stagnant. There are other socioeconomic factors that could be contributing to the pain of it, like the distribution of wealth, increased illness, or changing social norms in what requires a provider visit. The most likely social factors — population and median wage increase — are not contributing to why we are spending more.

Taking the total health expenditures (rounded billions) and dividing by census population (rounded millions) — which is so rough that really the only thing to give credence to is the increases — breaks out to:

Sources: Healthcare increases, [https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/]
Population increases, [https://www.census.gov/data/tables/time-series/dec/popchange-data-text.html]
Sources: Healthcare increases, Population increases

Remember, these are dollars that have been tracked to 2020 dollars. This is not the evidence of inflation, but in how many dollars by today’s standard dollar, per person. So, it’s not a change in population, or increased wealth base, or inflation; but a dramatic increase in expenditures.

Health insurance is a huge cost

According to the US Department of Health and Human Services and Healthcare.gov, ACA had three goals: make insurance available to more people, expand Medicare to the working poor, and support change that is aimed to lower the cost of care.

The cost of insurance increased. Insurance cost briefly stabilized leading up to passing the Affordable Care Act (ACA), then surged (making up for the previous years’ stabilization) and increased apace.

Source: NCSL, Health Insurance: Premiums and Increases

Insurance costs have not gone down. They won’t be going down.

Why? Insurance is in business to make a profit, and what it happens to profit from is the cost oversight of healthcare. If it doesn’t make a profit, it fails as a business. If it doesn’t continue increasing profit, it fails as a business. How it creates profit is a complex moving target, but it is the primary goal. Health and wellbeing is a statistics game and is agnostic to the specific individual, with the caveat that acknowledged preventative measures have proven to statistically reduce cost.

Price opacity

Price transparency, how hugely disparate the pricing can be and how hard both insurers and medical systems fought to keep opacity, is such a topic that the No Surprises Act was passed in 2021 for effect as of January 1, 2022. The goal is to remediate the lack of transparency. Different points of view are already slightly skewing interpretation.

At the heart: we can’t shop around if we can’t see the prices, which is bonus if the goal is to profit. A person has already received the goods/services provided, so legal ramifications kick in if they don’t/can’t pay the bill as required.

Illness as a profit center

We can cite the how venture firms bought EMS services and air ambulances. We have dramatic price increases to quality/dependent medications (epi-pen, insulin, and others), quantity-use of known addictive substances (oxycontin), and even our nursing homes. We’ve compiled the numbers involved with medical debt32, to which all those things are contributing.

Consider the whole, and the thread linking them is profit. This isn’t the idea of being well-rewarded for doing good work, but the idea of someone seeing an opportunity to harvest more money and setting about doing it. Run it to the ground, like with EMS services. Push to the point of egregious criminal liability, like Perdue and oxycontin. Increase the prices dramatically because the people using it need it to survive.

The ways to modulate these are complex. Usually it takes government intersession — like with the ACA and the No Surprises Act — to modulate business behavior that isn’t responding to market pressures. Why it’s not responding to market pressures is complex, from emotionally driven behaviors to a deep history of successfully opposing healthcare reform. I’m not sure we can effectively change the environments that spark the emotions, and healthcare reform has a long history of mostly failure.

If, as a culture, we really want to put pressure on healthcare business to change, the most effective pressure point is probably changing our wealth narrative. I don’t know if we have it in us.

This is part of Deconstructing US Healthcare.

--

--

eternal work in progress. wrangler of data and empathy, understander of process, seeker of giggles.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
angela madsen

eternal work in progress. wrangler of data and empathy, understander of process, seeker of giggles.