Check this very scary projection of what current trends in health-care spending will mean for our economy: a growing weight that will account for half of GDP by 2082:
Peter Orszag, Obama’s budget director, shows that slide in his standard talk on what’s wrong with our budget. It shows why, as Ezra Klein puts it,
an odd bedfellows coalition of centrist economists ranging from Dean Baker to Henry Aaron to Paul Krugman to, well, Peter Orszag and Jason Furman have been forcefully arguing that there is no such thing as an “entitlement crisis.” Social Security is safe. The crisis is in Medicare. But more than that, the crisis is in health care.
These folks argue that absent real reform that not only gives universal coverage but cuts out our most inefficient health-care spending, the health-care sector will sink the economy. Health-care reform, therefore, should get much higher priority than entitlement reform.
Where’s the fat? Much of it is in expensive treatments that studies have shown bring no real benefit. As David Leonhardt describes in his Times Magazine piece on the budget crisis,
Seltzer has collected large amounts of data from his clients on how various doctors treat patients, and his numbers present a very similar picture to the regional data. Seltzer told me that big-spending doctors typically explain their treatment by insisting they have sicker patients than their colleagues. In response he has made charts breaking down the costs of care into thin diagnostic categories, like “respiratory-system diagnosis with ventilator support, severity: 4,” in order to compare doctors who were treating the same ailment. The charts make the point clearly. Doctors who spent more — on extra tests or high-tech treatments, for instance — didn’t get better results than their more conservative colleagues. In many cases, patients of the aggressive doctors stay sicker longer and die sooner because of the risks that come with invasive care.
A lot of this comes from aggressive marketing of drugs, devices, and therapies by industry — some of that aggravated by payments to doctors for using or advocating use of such therapies. Cleaning that arena up via the FDA will help. But the key, suggests Leonhardt, is identifying the inefficient treatments and then knocking them off the lists of reimbursable expenses: a much tougher job.
The first step toward turning “less efficient” doctors, in Seltzer’s euphemism, into “efficient” doctors would be relatively uncontroversial. The government would have to create a national version of his database and, to do so, would need doctors and hospitals to have electronic medical records. The Obama administration plans to use the stimulus bill to help pay for the installation of such systems. It is then likely to mandate that, within five years, any doctor or hospital receiving Medicare payment must be using electronic records.
The next steps will be harder. Based on what the data show, Medicare will have to stop reimbursing some expensive treatments that don’t do much good. Private insurers would likely follow Medicare’s lead, as they have on other issues in the past. Doctors, many of whom make good money from extra treatments, are sure to object, just as Mancur Olson would have predicted. They will claim that, whatever the data show, the treatments are benefiting their patients. In a few cases — though, by definition, not most — they may be right. Even when they are not, their patients, desperate for hope, may fight for the treatment.
Klein’s post, by the way, is mainly about how the appointment of Judd Gregg as commerce secretary should not be seen as necessarily a signal that the traditional entitlements like Social Security are on the block; just as likely, Klein says, that Obama means to bring Gregg’s cut-the-fat energies to bear on the health care problem.