The Truth About Rising Health Care Costs

The Truth About Rising Health Care Costs

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Health care is failing and costs are too high, according to most people.

It isn’t – and they aren’t. The health care we enjoy in this country is keeping us healthier longer than ever before and costs are skyrocketing because demand is.

We’re living longer – let’s celebrate! We have access to incredible new medicines and treatments, we’re highly informed consumers with a world of medical information at our fingertips, and illnesses and diseases that were once certain death sentences can be endured, managed – and beaten.

But these great strides are too often overlooked in the endless arguments about “slashing spending.” Here’s the problem: If we keep our health care reform discussions centered on cost cutting, we risk losing goods and services that people rely on to live healthy and productive lives. We risk cutting the research and development necessary to create tomorrow’s game changers. We risk ending investments that may lead to critical breakthroughs.

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Reform is sorely needed – yes. Meeting the 21st century demand for health care is going to require imagination – yes. But it’s time to ask a different question: Who’s spending money on health care and why?

New payment structures and responsibilities need to be devised. In the U.S. and globally, governments are growing increasingly incapable of paying the bill. Demand will continue to soar, and with it, spending, largely because of older demographics.

The Government Accountability Office (GAO) and Goldman Sachs, two very different institutions with disparate agendas, each studied the federal government’s finances. And they each concluded that things must change. According to the GAO report, a 270-page financial audit of the U.S. government’s 2011 and 2012 fiscal years, “the current structure of the federal budget is unsustainable.” The organization took demographic projections and factored these against the per capita federal expense for health care services.

Goldman Sachs, meanwhile, reached a similar conclusion. Its new report endorses the “preeminence of the U.S. relative to other economies,” but delivers a huge caveat: “The biggest hurdle to fiscal reform is a reduction in health care costs. Unabated, health care costs including Medicare and Medicaid will grow from 5 percent of GDP to 11 percent by 2042.” Even with such daunting figures, though, Goldman Sachs is optimistic the U.S. will figure it out.

How so?

First, we can align our concept of “aging” with 21st century longevity facts. We routinely live into our 90s now – so the number 65 can no longer be a benchmark for public authorities to pick up health care tabs. On top of this, it’s our responsibility to stay socially and economically productive so that we don’t bankrupt the very system that helped us get where we are.

Second, we can closely examine what we’re paying for. With Alzheimer’s, a large and growing body of scientific evidence shows that investments in research and development will pay dividends by reducing future costs of treatments and care. This is the case with other chronic conditions, too, such as vision loss. We can’t forsake the future.

Sickness is more expensive than prevention. It’s why both public and private payers need to move away lead from cutting and toward investing. Good leadership in health care, aging, and policymaking can steer the conversation away from How much are we spending? and, instead, toward the much more valuable Who is paying for what?

Michael W. Hodin, Ph.D., is Adjunct Senior Fellow at The Council of Foreign Relations and Executive Director of The Global Coalition on Aging.


Executive director of the Global Coalition on Aging, Michael W. Hodin, Ph.D., is also managing partner at High Lantern Group and a fellow at Oxford University's Harris Manchester College.