Fixing U.S. Healthcare – We Need a Holistic Approach

U.S healthcare spending is out of control. It currently accounts for approximately 18% of the U.S. GNP (gross national product) and it is growing annually. Per capita healthcare spending in the U.S. is much higher than in any other country while our overall outcomes fall short.  It is not clear how the Affordable Healthcare Act of 2012 (Obama Care) will impact total healthcare expenditures. It is designed to reduce overall costs. Some people think it will increase costs. What is clear is that much more needs to be done to address both healthcare costs and the overall quality of healthcare and health outcomes.

U.S. healthcare … Per Capita Healthcare in the U.S. is Much More Costly than in Any other Advanced Country while our Outcomes such as Life Expectance are not as Good

Source: MSNBC.com 2012 http://bottomline.msnbc.msn.com/_news/2012/04/01/10922752-countries-that-spend-the-most-on-health-care?lite

 

United States

Norway

Switzerland

Netherlands

Canada

Rank – National per-capita spending 

1

2

3

4

6

Total expenditure on health per capita

$7,960

$5,352

 

$5,344

$4,914

$4,478

Expenditure as percent of GDP

17.4%

(the most)

9.6%

(16th most)

11.6%

(5nd most)

12%

(2nd  most)

11.3%

(7th most)  

Life expectancy

78.2 years (27th highest)

81.0 years (10th highest)

82.3 years (2nd highest)

80.6 years (14th highest)

80.7 years

(tied for 12th highest)

 

National U.S. Health Care Expenditures (2011)

Source: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/highlights.pdf

U.S. health care spending was $2.7 trillion in 2011, or $8,680 per person. Health spending grew 3.9 percent in 2011, the same rate of growth as in 2009 and 2010. National health spending in 2011 was 17.9% of the U.S. GNP (gross national product).

2011 Health Spending by Type of Service or Product: Personal Health Care 

  • Hospital Care: $850.6 billion
  • Physician and Clinical Services: $541.4 billion
  • Other Professional Services: $73.2 billion. Includes establishments that provide services such as physical therapy, optometry, podiatry, and chiropractic medicine.
  • Dental Services: $108.4 billion
  • Other Health, Residential, and Personal Care Services: $133.1 billion. Includes expenditures for medical services that are generally delivered by providers in non-traditional settings such as schools, community centers, the workplace, ambulance providers, and residential mental health and substance abuse facilities.
  • Home Health Care: $74.3 billion
  • Nursing Care Facilities and Continuing Care Retirement Communities: $149.3 billion
  • Prescription Drugs: $263.0 billion in 2011, following a historically low growth rate of 0.4 percent in 2010.
  • Durable Medical Equipment: $38.9 billion. Includes items such as contact lenses, eyeglasses and hearing aids.
  • Other Non-durable Medical Products: Retail spending for other non-durable medical products, such as over-the-counter medicines, medical instruments, and surgical dressings, reached $47.0 billion in 2011. Spending in this category increased at the same rate in both 2010 and 2011, at 4.0 percent.

Health Spending by Major Sources of Funds:

  • Medicare: Medicare spending, which represented 21 percent of national health spending in 2011, grew 6.2 percent to $554.3 billion, an acceleration from growth of 4.3 percent in 2010. Contributing to the increase in 2011 was faster growth in spending for skilled nursing facilities and physician’ services, as well as an increase in Medicare Advantage spending growth.
  • Medicaid: Total Medicaid spending grew 2.5 percent in 2011 to $407.7 billion, a deceleration from 5.9-percent growth in 2010. This was partly due to slower growth in Medicaid enrollment of 3.2 percent in 2011 compared to 4.9 percent-growth in 2010. Federal Medicaid expenditures decreased 7.1 percent in 2011, while state Medicaid expenditures grew 22.2 percent—a result of the expiration of enhanced federal aid to states in June 2011.
  • Private Health Insurance: In 2011, private health insurance premiums and benefits each increased 3.8 percent—accelerating from growth in 2010 of 3.4 percent and 2.7 percent, respectively. The net cost ratio for private health insurance – the difference between premiums and benefits as a share of premiums – remained unchanged from 2010 at 12.3 percent. Private health insurance enrollment increased 0.5 percent in 2011 after declining each year 2008-2010. Even so, on a per enrollee basis, private health insurance benefits grew 3.2 percent in 2011, decelerating from growth of 4.6 percent in 2010, and was partly a result of additional enrollees aged twenty-six and under who gained coverage under the Affordable Care Act.
  • Out-of-Pocket: Out-of-pocket spending grew 2.8 percent in 2011 to $307.7 billion, an acceleration from growth of 2.1 percent in 2010 that reflects higher cost-sharing and increased enrollment in consumer-directed health plans.

Health Spending by Type of Sponsor:

The federal government financed 28 percent of total health spending in 2011, a substantial increase from its share of 23 percent in 2007. Meanwhile, the shares of the total health care bill financed by households (28 percent), businesses (21 percent), state and local governments (17 percent), and other private revenues (7 percent) all declined during the same time period. 

America’s healthcare-system-induced deaths are the third leading cause of death in the U.S., after heart disease and cancer.

Source: World Health Education Initiative (year 2000)  http://www.health-care-reform.net/causedeath.htm

American deaths per year due to medical treatment problems

 

Total deaths

Unnecessary surgery

Medication errors   in hospitals

Other errors in  hospitals

Infections in   hospitals

Negative effects of   drugs

 225,000

 12,000

 

 7,000

20,000

 80,000

 106,000

Weight increase and smoking are seriously impacting America’s health and healthcare costs

  • The U.S. spends $1.8 trillion a year in medical costs associated with chronic diseases such as diabetes, heart disease and cancer, and all three are linked to smoking and obesity, the nation’s two largest risk factors, according to the America’s Health Rankings report.
  • Smoking is the No. 1 preventable cause of death in the U.S, accounting for about 440,000 deaths annually. For every person who dies from a smoking-related disease, 20 more people suffer with at least one serious illness from smoking. In 2000–2004, cigarette smoking cost more than $193 billion (i.e., $97 billion in lost productivity plus $96 billion in health care expenditures). Information published in 2005 documented that secondhand smoke costs more than $10 billion (i.e., health care expenditures, morbidity, and mortality).

http://www.cdc.gov/tobacco/data statistics/fact sheets/fast facts/ 

  • Americans have gotten heavier and that is significantly impacting healthcare costs. Average adult Americans were about one inch taller in 2002 than in 1960, but nearly 25 pounds heavier than they were in 1960, according to the Centers for Disease Control and Prevention (CDC).

http://usgovinfo.about.com/od/healthcare/a/tallbutfat.htm

USA Today  http://www.usatoday.com/news/health/weightloss/2009-11-17-future-obesity-costs N.htm   

  • The U.S. Weight Loss Market was Worth $60.9 Billion in 2011 – Overall it is not working! ….As a nation, the more we spend on losing weight, the heavier we get

Marketdata Enterprises, Inc.    http://www.prweb.com/releases/2011/5/prweb8393658.htm

  • The U.S. has over 900,000 bankruptcies annually (2009) due to medical bills (62.1% of the 1.5 million bankruptcies of individuals in the U.S.)

http://www.cnn.com/2009/HEALTH/06/05/bankruptcy.medical.bills/

  • There are many more people handling medical paperwork in doctors’ offices, hospitals, nursing homes, health insurance companies, etc. than there are medical professionals treating patients (doctors, nurses, etc.).
  • There are an estimated 50 million people without health insurance. The Affordable Care Act is addressing this issue. Many of these uninsured people cost the U.S. and State Governments and hospitals billions of dollars annually in emergency room services
  • Pharmaceutical advertising pushes pharma sales/usage way up each year
  • Americans overall are over-medicated. For example, millions of Americans rely on drugs to lower cholesterol and triglycerides rather than eating a healthy diet and exercising regularly. In addition to preventing cardiovascular problems, eating a healthy diet and getting regular exercise also helps to prevent obesity, cancer and diabetes, which is now at epidemic levels.
  • The potential overall cost of painkiller abuse is more than $70 billion a year. Pill addicts who shop around for doctors to score prescriptions cost insurers $10,000 to $15,000 apiece annually. The annual U.S. cost in lost productivity is $42 billion. The annual criminal justice cost is $8.2 billion.

CNNMoney 2008: http://money.cnn.com/2012/02/22/news/economy/prescription_drug_abuse/index.htm

  • U.S. pharmaceutical & biotech companies charge much more for the same drugs in the U.S. than in other countries
  • The U.S. has annual healthcare fraud of between 3%-12% of GNP ($75 – $250 billion). In addition to fraud, the Government Accounting Office reported that in 2011, Medicare and Medicaid paid an annual $65 billion in “improper payments.” It defines “improper” to include payments that are made in error — not fraud, but wrong just the same.

http://www.foxbusiness.com/personal-finance/2013/02/22/how-big-is-medicare-fraud/

Summary

The U.S. has the most-costly and best healthcare system in the world … if you’re rich and can afford the best medical insurance and costs not covered by medical insurance, or if you happen to work for a company that provides good comprehensive medical insurance to its employees. For everyone else it is costly and much less effective. For millions of Americans, healthcare simply is not available, although Obama care is making affordable medical insurance available to a significant portion of the uninsured people.

Key questions for you:

  1. How would you rate the effectiveness of the U.S. healthcare system?
  2. How would you fix it?
  3. Do you agree a holistic approach is needed for fixing the U.S. healthcare system?
  4. What should be done to increase emphasis on prevention of health problems? What role can each person play?
  5. Providing health insurance is a significant burden for many companies including the insurance and administrative costs and the need to have healthcare expertise. Should there be an approach that gets employers out of providing medical insurance?
  6. At a total cost of $2.8 trillion/year, there are many large vested groups fighting hard to maintain the healthcare status-quo. Healthcare insurance companies, pharmaceutical companies, pharmacy companies, medical device companies, doctors, nurses, hospitals, nursing homes, healthcare benefits companies and other groups see risks to their bottom lines if the key healthcare problems are seriously addressed. Try to get people to eat healthier diets and the food industry and certain farmers (e.g. beef and dairy industries) will react to thwart the efforts. How should we deal with this important issue?

About Howard Deutsch

Howard Deutsch is the CEO of Quantisoft, a New Jersey based full-service survey company conducting employee, organizational effectiveness, leadership feedback, customer satisfaction, IT customer satisfaction, enterprise risk and other types of customized surveys since 1999. Howard has extensive senior line management, internal and external consulting experience in many industries. He has a B.S. in Industrial Engineering from Rensselaer Polytechnic Institute and an MBA in Finance from St. John's University. He was an adjunct faculty member for several years at the Seton Hall University School of Business.
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