Health Care Tomorrow: A Revisionist Preview

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Jeff Goldsmith predicts that, despite inevitable changes, the future of health care is more sound than many people believe. Goldsmith, president, Health Futures, Inc, Charlottesville, Va, and associate professor of public health sciences at the University of Virginia, Charlottesville, presented A Look Over the Horizon at Beyond™, the Third Annual GE Healthcare Outpatient Imaging Center Conference, in Washington, DC, on July 25, 2008. The changes to come, he says, do not all merit the sense of impending doom with which some analysts surround them.

Jeff Goldsmith

The rate of increase for the cost of health-insurance premiums has slowed precipitously since approaching 14% in 2003, reaching a point in 2007 that put it (at 6%) only about 2% above wage increases and 4% above general inflation. This slowed growth in health care costs, Goldsmith says, is attributable primarily to three factors.

First, hospital admissions and surgeries have decreased. Many physicians are seeing fewer patients than they did in recent years, and many of the physicians from the baby-boom generation have left medicine and have not been replaced. Both factors reduce the patient base of which inpatient admissions are a percentage. Because consumers have found their copayments increasingly hard to afford, there has been an apparent decrease in admissions for elective procedures, Goldsmith adds.

Considerable declines in cardiac admissions (including those for acute myocardial infarction) have been taking place since 2000. In addition, admissions from the emergency department have been dropping because payor and capacity pressures have combined to push patients who would once have been admitted to the hospital into 23-hour observation beds in the emergency department instead.

Second, spending on prescription drugs has dropped dramatically. Sales growth for pharmaceutical companies, which exceeded 19% in 1999, had decreased to about 6% by 2007. There has been a large increase in the number of employees whose prescription coverage is based on a tiered system that encourages the use of generic drugs, accompanied by a decline in the number of workers covered by plans that do not make such coverage distinctions. Faced with higher out-of-pocket drug costs, consumers have responded by requesting that generic drugs be prescribed for them. This trend is likely to accelerate, since drug patents worth approximately $88 billion (and covering several of what Goldsmith describes as major blockbuster drugs) will expire between 2008 and 2013.

Third, inflation, a slowing economy, and higher out-of-pocket expenses have combined to create a cash crunch for health care consumers that acts as a deterrent to elective health care. For those who have employer-sponsored health insurance, the average percentage of the premium paid by the worker who has family coverage increased only 1% (from 27% to 28%) from 1999 to 2007.

The actual average premium that this percentage represents, however, has increased from $129 to $273 per month paid by the employee. By 2005, out-of-pocket health care costs had reached $249 billion, and adding payroll deductions for insurance premiums to that amount brought consumer health spending to a total of about $438 billion per year. The cost of health care borne by consumers closely approached total spending for Christmas in 2005 ($440 billion), and was not far from total restaurant sales ($476 billion). It is not surprising, Goldsmith notes, that elective procedures have not been consumer priorities, especially since real earnings have been declining over the same period and have been negative since October 2007.

Policy Changes

In what Goldsmith describes as a political disconnect, many legislators and other policymakers have failed to understand the public’s health priorities. Voters—93% of whom have health insurance—are not angered by the fact that 47 million US residents are uninsured, but by the price that they are paying for their health care. In 2007, rising health care costs were the public’s most serious economic concern, Goldsmith says. Health reform would cost $150 billion, he estimates, and would require raising taxes and/or taking subsidies away from powerful interest groups that include employers, labor unions, insurance companies, and health care providers.

The uninsured who would benefit from this, Goldsmith adds, are not organized and do not vote, in general. They consist of about 10 million people aged 19 to 26, with