Posts Tagged ‘Business

05
Feb
10

Taking the measure of healthcare “elephant in the room”

I called this blog The Vortex because it seems to me we’re in the midst of some really big forces that’ll send us spinning. One of those — here in the US and elsewhere — is demographics. Specifically, the denoument of the Baby Boom generation — of which I am a member — is going to cause perhaps even more turbulence than our advent.

I seldom read George Will’s column in the WashPo because I almost never agree with his perspective on things, but the one he published yesterday brings up the issue of the cost of care of the elderly and its impact in the next couple of decades. I think the situation is of great concern even if I don’t agree with Will’s conclusions about what to do.

The column quotes data about the increase cost of care with age from “Forecasting the cost of US Healthcare” in  the American Enterprise Institute’s newsletter.  The author, Robert Fogel, cites what I think is pretty compelling data about the cost of the end-of-life and, by implication, the possible total cost of the expiration of my generation.

Figure 1

…In this figure, the burden of per capita healthcare costs, which is based on U.S. data, is standardized at 100 for ages 50–54. Figure 1 shows that the financial burden of healthcare per capita rises slowly in the 50s, accelerates in the 60s, accelerates again in the 70s, and accelerates even more rapidly after the mid-80s. The financial per capita burden at age 85 and older is nearly six times as high as the burden at ages 50–54. Notice that the financial burden of healthcare for ages 85 and older is over 75 percent higher per capita than at ages 75–79. However, the physiological prevalence rates (number of conditions per person) is roughly constant at ages 80 and over.

Costs rise, even though the number of conditions (comorbidities) per person remains constant, because the severity of the conditions increases or because the cost of preventing further deterioration (or even partially reversing deterioration) increases with age. It should be kept in mind that standard prevalence rates merely count the number of conditions, neglecting both the increasing physiological deterioration with age and the rising cost of treatment per condition.

Mr. Fogel goes on to discuss various ways the curve could play out over the next couple of decades and ends with what I think is an amazingly optimistic forecast that rising US incomes is going to inspire greater use of biotechnology that results in longer life, fewer chronic conditions and — by some calculus unclear to me — less than devastating total health care cost. In other words, not to worry about the hockey-stick graphs of huge long-term costs, and healthcare is a great business to be in. Read it for yourself and see what conclusion you reach.

This information is cited by George Will as part of a point I think is worth considering. The health care data sets up a contrast between the health care expenditures ahead for the US versus the very large expenditures being made for education in China as a stride toward having by the world’s largest economy by 2040. Will cites another article by Fogel in Foreign Policy titled: “$123,000,000,000,000*” — Fogel’s estimate of the total GDP of China in 2040. That’s a number intended to rock your world that will put China at 40% of world GDP while the US produces only 14%. So China replaces the US as the world’s economic hegemon less than 30 years from now.

The idea doesn’t make me shudder as badly as it would some other poeple, but I think the conundrum identified is valid: how is the US to allocate it’s resources? How much is going to be allocated to health care for us Baby Boomers versus how much is to be allocated to development of the next generations in a highly competitive world? That dilemma faces indivicual families as well. If grandma doesn’t have the money for things not covered by Medicare like long-term-care (which can run thousands of dollars per month), are you doing to wipe out the kids’ college funds?

During the recent health care reform debate calls for evidence-based treatment or comparative effectiveness were greeted by the demagogic  charge of “death panels.” Nevertheless, decisions about resources will be made, even if they’re only the path of least confrontation. This elephant-in-the-room isn’t going away, and it’s big.

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