The latest from DTC Perspectives

The Health Bubble

Dr. Bernadine Healy, health columnist for U.S. News and World Report, wrote a thought provoking column this week. It was titled, “Is Healthcare Armageddon Next? “ Dr Healy feels that with healthcare costs rising so fast, it is unsustainable. It is only a matter of time before the bubble bursts on a personal and government level.

Individuals are now spending $13,000 for insurance premiums versus $6000 in 1999. Government programs are swollen and will eat up almost all of government revenues in the future. Dr. Healy has no easy answer to the problem.

She says single payer government controlled healthcare is not the answer. Costs in countries with that system find costs rising as fast as in the United States.  Her solution is to get all stakeholders together without rigid ideological preconceptions to figure out a way to reduce cost. One of the things Healy says we need is better transparency on pricing. Hospital fees vary widely for the same services and vary vastly for individuals depending on insurance coverage.

She also cites prescription drugs as a problem in transparency. Deals are hidden and consumers pay very different prices for the same drug based on negotiations of PBM's. She also says about half the sources of rising costs are new drugs and technologies.

I do not know if Dr. Healy has all the analysis right. I do know that we have a major problem on affording healthcare that is in fact unsustainable. Much like the housing bubble, when prices rise faster than incomes, something has to give.

In the case of healthcare the burst bubble has several scenarios. The government could nationalize the system.  A crisis of affordability could lead to that action. Mr. Obama says he will lower costs with his program through negotiation with insurance companies. He does not, however, say how he will deal with an aging population using more and more technology and drugs. Is he going to have to ration care?

Another possibility is people minimize coverage to only cover only catastrophic care. This is not a good option for society as people will avoid routine care that is not covered.

Finally, it is possible that the market will become more transparent and competitive. Health care providers may one day sell on price with clear upfront information on fees for services. That would create more competition. Few of us have any clue what we are going to be charged, especially in a hospital. As co-pays rise, however, more of us will want to be informed what our tab will be.

I am afraid there is no easy answer to the healthcare cost problem. It is certain we cannot afford it on the current path. It is a certain bubble that will burst. Here is a case where we know it will happen and will require Government leadership. Given that Congress is dysfunctional, we cannot expect proactive leadership there. Can President Obama provide that vision? He may do just that or he may hold off the bad news until his second term. I hope he deals with it because the healthcare bubble bursting could have serious societal consequences that dwarf the financial crisis.