Implications for the Us Economy – Why Healthcare Needs Radical Transformation

Implications for the US economy – Why Healthcare Needs Radical Transformation

Spending on healthcare continues to face high levels of public scrutiny. The cost of healthcare has become a focal point in the debate over government spending, entitlement reform, and ways to reduce the federal deficit. This is no surprise. The United States spends more on healthcare, both per capita and as share of gross domestic product, than any other country in the world. In 2016, spending on healthcare reached $3.2 trillion. The share of gross domestic product devoted to health care spending was 17.8 percent in 2015, up from 17.4 percent in 2014. Coverage expansions that began in 2014 as a result of the Affordable Care Act continued to affect health spending growth in 2015. In that year, the faster growth in total health care spending was primarily due to accelerated growth in spending for private health insurance (growth of 7.2 percent), hospital care (5.6 percent), and physician and clinical services (6.3 percent). Continued strong growth in Medicaid (9.7 percent) and retail prescription drug spending (9.0 percent), albeit at a slower rate than in 2014, contributed to overall health care spending growth in 2015.  Following five consecutive years of historically low growth, from 2009 through 2013, health spending growth accelerated in 2014 (to 5.3 percent) and 2015 (to 5.8 percent). The faster growth in 2014 and 2015 occurred as the Affordable Care Act (ACA) expanded health insurance coverage for individuals through Marketplace health insurance plans and the Medicaid program.

Medicine in the 21st century is increasingly dependent on technology. Unlike in many other areas, the cost of medical technology is rising and its increasing use contributes to the spiraling healthcare costs. Many medical professionals equate progress in medicine to increasing use of technology that is often expensive and beyond the reach of most citizens. Healthcare today is driven by digital technology. Hospital, clinic, and other healthcare facilities are increasingly dependent on hospital information software.

So why has the digital revolution contributed to healthcare costs instead of reducing costs? The technology is used on the consumer, not by the consumer. While the consumer is the patient, the patient pays the manufacturer for the product and the healthcare provider for the service. The problem with the current system is that the demand is not necessarily created by the consumer. When the demand is artificially created to justify the use of technology, the cost of the service often increases. Increased technological awareness through the media, internet, and advertising also effects demand.

We need to avoid the temptation to embrace expensive technology that has a marginal impact on overall outcomes without seriously thought. Robotic surgery is an example of technology that is dispensable. Consistently excellence outcomes can be achieved without them. A limited number of companies dominate the market for robotic surgery and there is little focus on making the technology more widely accessible and less expensive. With most technology, quality increases while price decreases over time. However, with robotic surgery the cost has actually increased over time. We need to avoid the trap of equating technology with progress.

The healthcare industry is one of the most complacent industries. The common belief is that new technology will save the day and reduce healthcare costs for consumers. This failed notion is the problem; the status quo needs to change. A shift to free market principles and an emphasis on the consumer is what will reduce healthcare costs. If consumers see a new vision and understand how and why it matters to them, this is what will change the status quo of technological dependence. Healthcare is the perfect environment for this type of innovation, since little has been up ended in favor of the consumer over the past several decades.