NCPA - National Center for Policy Analysis

BENDING THE CURVE

February 24, 2010

Much of the motivation driving health care reform is grounded in the belief that U.S. health care spending is too high and rising too quickly.  Whether measured by individual insurance premiums, average spending per person, total national spending, or federal and state government health spending, U.S. health care expenditures are growing faster than inflation, faster than average wages, and faster than the gross domestic product (GDP).  Thus, the President has declared that one key purpose of health care reform is to "bend the cost curve" downward, explain Dr. Jason Fodeman, an Internal Medicine Resident at the University of Connecticut, and Robert A. Book, a health economist with the Heritage Foundation. 

However, this strong consensus that health care spending is too high and growing too fast has not led to agreement on the causes or the appropriate responses, say Fodeman and Book.  The most commonly proposed explanations for increases in overall health care spending include: 

  • Increasing prevalence of disease, whether due to an aging population, unhealthy lifestyle choices, or other factors.
  • The inefficient structure of the health insurance system.
  • Expensive new health care technologies, such as new drugs, medical devices, and other treatments.
  • Wasteful spending, such as over-treatment, "defensive medicine," excessive malpractice costs, and fraud. 

Each of these possibilities leads to a different set of appropriate policy solutions and has different implications as to whether the current proposals could, in the President's words, "bend the cost curve" downward, say Fodeman and Book. 

Regrettably, neither the House nor the Senate health care reform bills that were passed in late 2009 would "bend the cost curve" downward.  On the contrary, these bills would exacerbate the same inefficiencies and perverse incentives that have led to the current situation.  Even taking into account only a few of these factors, independent assessments by the Office of the Actuary in the Centers for Medicare and Medicaid Services have concluded that total national spending would increase even faster if either the Senate bill (H.R. 3950) or the House bill (H.R. 3962) become law.  The House and Senate bills appear to be based on a fundamental misunderstanding of the basic factors driving health care spending upward.  As a result, instead of restraining these basic factors, the bills neglect some and reinforce others, driving spending upwards instead of downward, say Fodeman and Book. 

Source: Jason Fodeman and Robert A. Book, "Bending the Curve: What Really Drives Health Care Spending?" Wall Street Journal, February 19, 2010. 

For text:

http://online.wsj.com/article/SB10001424052748703787304575075843971534082.html  

 

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