NCPA - National Center for Policy Analysis

TESTS OF DUBIOUS VALUE DRIVE UP HEALTH COSTS

November 15, 2007

Health care spending will consume about half of the U.S. economy in 75 years if nothing is done to curb growing costs, according to a Congressional Budget Office report released on Tuesday.

Other findings:

  • Medicare and Medicaid spending combined will grow to 19 percent of the gross domestic product in 75 years.
  • The two programs now account for 4 percent of gross domestic product (GDP).
  • The report also estimates that Medicare spending will be 50 percent higher by 2082 than a projection released in April by Medicare trustees.

CBO Director Peter Orszag on Tuesday says that policymakers are focusing on the wrong issue by weighing the effects of the aging baby boom generation on health care costs rather than looking into treatment effectiveness and quality.  "The nature of the long-term fiscal problem has been misdiagnosed," he says, adding that the aging population "is not by any means the main factor" behind the projected rise in cost growth.  He also noted that many new medical treatments and tests are "of dubious value."  In their efforts to stem the growth of health care costs, Congress and federal policymakers need to promote cost effectiveness and "evidence-based" medicine.

  • According to Orszag, excess health care cost growth will account for 90 percent of the growth in Medicare and Medicaid spending by 2082, whereas the aging population will account for 10 percent.
  • Some CBO health care analysts believe health care spending could be halved without damaging quality and outcomes, while other analysts have cited lower figures.

Source: Joanne Kenan, "Tests of Dubious Value Drive up Health Costs: Study," Peter R. Orszag, Reuters, November 13, 2007; and "The Long-Term Outlook for Health Care Spending," Congressional Budget Office, November 2007.

For Reuters text:

http://www.reuters.com/article/domesticNews/idUSN1359387320071113

For study:

http://www.cbo.gov/ftpdocs/88xx/doc8807/11-13-2007-LT-Health-Presentation.pdf

 

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