Health Care Costs: Still the Pig in the Federal Python
by Addison Wiggin
"Federal spending for health care programs is growing much faster than other federal spending and the economy as a whole," according to a recent analysis from the Congressional Budget Office (CBO).
We said as much in these pages when we reminded you that health care's portion of the federal budget keeps doubling every 20 years or so. By now it eats up 25% of the budget. Will it really be 50% two decades hence?
The words of the late economist Herbert Stein come to mind: "If something cannot go on forever, it will stop."
Obamacare? It's a contributing factor to the metastasis, but not a big one. Even after Obamacare is fully in place, the CBO says most of the growth in health care spending will come from Medicare. In a 2009 study, pre-Obamacare, the Mercatus Center furnished the helpful chart below showing not only that Medicare spending is projected to grow… but the CBO's projections of future Medicare spending keep growing too.
Those are all distinct possibilities. But our mind keeps coming back to a number we reported in early 2012.
All that money Uncle Sam spends on health care? One out of every six dollars is spent on the final year of life.
And here's a new number we've run across: A quarter of Medicare's budget is spent on the final year of life. And 10% of Medicare's spending goes toward the final 30 days.
As we wrote 2½ years ago, all that spending is the result of a "whatever it takes" approach to forestalling the Grim Reaper's inevitable appearance. That approach remains standard operating procedure, according to a new study from Stanford surveying nearly 1,100 doctors. It finds medical science has "its default set to maximal interventions for all patients, irrespective of the effectiveness of doing so."
But it's impossible to have that "honest conversation." Remember "death panels" when Obamacare was being debated in Congress five years ago? That was a clause in the bill -- ultimately dropped -- providing for government-paid counseling to plan for end-of-life care.
Republicans objected that government would end up deciding who would live and who would die. It was a fair objection. But it also skirted an "honest conversation" confronting this question: Is it fair for doctors to do "whatever it takes"… and push off the costs onto a dead-broke Medicare program, to be paid for by the next generation?
|The Stanford study finds many doctors questioning the “whatever it takes” approach…|
But when it comes to the care of their patients, it's still full speed ahead. The study says upfront the "current fiscal system rewards hospitals and doctors for medical procedures and providing high-intensity care to terminally ill persons."
Indeed, the number of Medicare patients who saw 10 or more doctors in the final six months of life grew 12% from 2003–07, the most recent figures available. The number of days those patients spent in intensive care also grew.
We don't know when the cost curve will reach the breaking point. But we know it will. When the flow of "free" money is shut off, maybe doctors will start having an "honest conversation" with patients about treatments that reach "a tipping point where the treatment becomes more burdensome than the illness itself," as the Stanford study puts it.
It's uncomfortable to think about. But we figure it's better if you hear about it from us now than from a doctor a few years hence when someone you love is approaching his or her final days.
Addison Wiggin is a three-time New York Times bestselling author and the cofounder of the Daily Reckoning. © 2014 Agora Financial, LLC.