Economic Problems of Health Care Delivery

The Importance Attached to Economic Problems of Health Care Delivery

The health sector receives attention from policymakers because of its widely perceived problems. The substantial resources devoted to health care are reflected in a more meaningful way through the average level of this nation’s spending for health care. Table 1-4 provides various measures of health care spending and its growth since 1960. Table 1-4 shows how national health expenditures (NHE) grew from $27 billion in 1960 to $2,486 billion in 2009. During that period, the U.S. population grew by 65 percent from 186 million to 307 million. Thus, NHE per capita rose by a multiple of 55, from $147 in 1960 to $8,086 in 2009. However, the real increase is what matters most. Prices, as measured by the broad-based consumer price index (CPI), rose 625 percent over the same period. After deflating by the CPI, we find that real expenditures per capita in 2009 were 7.6 times the 1960 level—still a hefty increase.1

Inflation 
Although we have deflated the spending values using the CPI, medical care prices have grown faster historically than prices overall. Table 1-4 also shows the pattern of health care inflation since 1960. Note that hospital and physician care prices have risen much faster than the CPI—a phenomenon that is typical of other health care services and commodities as well. In 2009, the medical care price index (not shown in Table 1-4) rose by 3.2 percent even as the U.S. economy experienced deflation. Medical price inflation is a common problem for maintaining health programs, and it has spurred numerous cost-containment efforts by the government. Understanding and evaluating the effects of such measures are important tasks for the health economist

Access
For many, the rising costs significantly reduce accessibility to health care. Financial affordability influences demand for most goods and services, and there are many reasons why some people do not have health insurance. What is clear is that the number of uninsured has risen and that in 2009 and 2010 approximately 50 million people in the United States lacked insurance. Many more are considered to have inadequate insurance. The problems of cost, inflation, and uninsured people have led to numerous proposals for some form of national health insurance. Later in this book, we will examine several broad groups of plans, the national health insurance programs that exist in other countries, and the newly established Patient Protection and Affordable Care Act, passed in 2010.


Quality 
Increases in the quality of care contribute to spending increases. Often, the focus is on ensuring quality through professional licensure and certification and, especially for hospitals, through quality-assurance programs. At the same time, concerns arise about access to high-quality care, and they are not limited to those without insurance or with minimal insurance. Other observers, however, express concerns that the quality of care in the United States is often excessive, especially for some “high-tech” treatments. For such treatments, the costs of resources may exceed the benefits to patients. The interplay among insurance, technology, and consumption is of major interest to economists.