Why have U.S. health care costs gone up faster than general inflation since the '50s?

Or . . . have they? (That was never conclusively answered in this GQ thread.)

But if they have, why?


The easy, less expensive treatments were developed first. As we push the edge of the envelope, each successive level is generally less obvious and more expensive.

Labor costs, in general, are much higher now than in the 50s. That’s why so much of the manufacturing sector has moved out of the developed world. Most health care, by its nature, can’t be outsourced.

As a society, we have developed a whatever-it-takes attitude about extending life. This is reinforced by the threat of malpractice claims, one theme of which is look-under-every-rock. This level of care is expensive.

Doubtless there are other reasons. Those are the ones that occur to me off the top o’ my head.

Another obvious one. The age distribution curve has shifted significantly to the right since the 50s. People live longer and a higher proportion of the population is older. Older folks tend to have more health care needs, including chronic conditions requiring more-or-less continuous treatment.

BTW, I may be answering/debating a slightly different question than the one you have in mind. To me, the problem with health care costs is that they now consume such a large proportion of the economy, and that proportion will continue to rise for the foreseeable future. Whether the rate of health care costs is rising faster than inflation isn’t terribly important, IHMO. Even if it ain’t, the proportion of the economy dedicated to this one commodity will continue to grow to a point, I fear, where we simply can’t afford it. At that point, some REALLY hard choices will have to be made.

There are things we can, and do, treat now that in the '50s were left alone. To take an obvious example, back then, if you had an obstructed blood vessel to your heart, you died. Today you get an angioplasty, or a stent, or a bypass, all of which are very expensive. Back then, if you had a premature baby that weighed only 2 pounds, the unfortunate infant usually died. Today’s advanced neonatal services can work miracles – at a price. Back then, if you had a chronic mental illness it was often untreated. Today we have therapies, including pharmaceutical ones, that can be quite expensive. I’m sure you can think of many more examples.

Labor costs are a big component, but we need to consider why they affect the medical business so much more.

For the majority of industries, there’s been a reduction in labor needs during the past fifty years. With technology, strategies for higher productivity, and/or a focus on motivating indviduals to work harder, we’ve found ways for an average person to do more work. McDonald’s workers assemble and delivers hamburgers much faster than they used to. Dock workers can load and unload a container ship with 500 containers in much less time. Technology allows a single person at the Intel plant to produce more microchips per day.

That process doesn’t generally apply to medical care. We still need one doctor to keep an appointment with a patient, one or more surgeons (and some assistants) to perform a surgery, one chiropractor to poke and prod a patient’s back. Technology hasn’t reduced the need for actual people to actually be there, doing actual work.

Similar logic applies to academia, and explains why college costs rise so quickly. In the 50’s, you needed one professor per classroom. Today, you still need one professor per classroom. There’s no way to speed up lectures the same way we sped up hamburger production.

That just means there’s more overall demand for health care. High demand does not drive up the price of something unless supply fails to keep pace, and don’t we have a lot more doctors and hospitals now than we did then?

BTW, I read once that doctors in Canada get (and generally are satisfied with) much lower salaries than doctors in the U.S. expect. Is that true?

Actually, a lot of college and grad-school courses now can be taken online. But I don’t know how that affects the manageable student-teacher ratio. (It’s just as much work to grade 30 papers from students you’ve never met.)

Costs for actual doctors have tended to fall in the last 20 years. However, costs for MRI techs, Cat-Scan techs, ultrasound techs, and similar positions have been added to the overall cost. Even if numbers eventually drive down prices, those are wholly new positions that did not even exist in the 1950s so there is a cost that cannot be reduced to zero.
(We are also paying for the hardware to perform those functions (not cheap) and the guys with screwdrivers to keep them functioning (another set of labor positions that did not even exist 40 years ago).)

Doctor visits are also high to cover malpractice insurance. Actual income to the doctor is not that high compared to the 1950s, but the cost for a visit to the office is higher because the doctor charges more to recover the costs of insurance premiums.

:confused: Of course it’s important, if it means health care costs amount for a greater proportion of the individual patient’s income than they used to! It’s like getting your rent raised but not your salary!

Sure, blame the lawyers! :wink:

That’s certainly true at the cheapo universities. At the higher-end universities, students and parents still expect to always have a professor there in the classroom to do the teaching. Looking at, say, the top 100 schools in the country, prices have risen much faster than inflation, particularly at private schools that can’t rely on government funding.

But the cases aren’t comparable. You can still get a 1950s standard of care for near 1950s prices. What you can’t get is a 2006 standard of care for 1950s prices. Cancer needn’t be a very expensive disease, the treatment can be as cheap as treating the common cold. Bedrest and plenty of fluids. Only trouble is, the patient is likely to die. It’s easy to hold down costs if you’re OK with the patient dying.

Well, to an extent it’s probably true. I know that legal costs are a much bigger factor of American healthcare costs (or, more accurately, malpractice insurance is) than in, say, Britain.


I doubt that deeply. Cite?

Article cites a study by the US department of Health and Human Services (yes, it is from 2002, but I think that’s recent enough to be included in this discussion, especially since things are unlikely to have changed much in the past 3 years)- legal costs, in particular malpractice insurance ad $60-$110 billion to private healthcare costs and $30-$60 billion to federal costs each year. Costs are considered to be lower for the UK, though I had difficulty finding figures, at least by a brief Google (http://www.cmwf.org/Publications/Publications_show.htm?doc_id=283969- I realise this undermines my original point [see below] but it acknowledges differing legal costs as a [small] factor in differing care costs).

Nevertheless, it does not make up such a high factor as I had previously believed, according to some sites (http://www.joepaduda.com/archives/000243.html, for one, or http://www.healthaffairs.org/press/julyaug0501.htm ). In fact, it appears that malpractice insurance premiums have gone down, in real terms, over the past 20 years! However, as the comments there point out, this translates to greatly increased costs for high-claim services (like OB-GYN work, for example) but reduced ones for other services. So I’ll partially retract my claim: malpractice insurance and other legal costs make up a small part of increased US spending (0.5%, according to some estimates - mind you, that’s still in the billions), although the main reason for increased cost over time appears to be drugs, wages and healthcare generally.

How about older people vote? At a much higher percentage than anyone else. They have a higher demand for health care and they have the political clout to insure that they will receive it.

The point made previously here, about rising expectations driving costs up, is a terrific one. I was at a seminar earlier this year in which a panelist gave the example of his grandmother versus his mom: When Gramdma broke her hip, back in the 50’s, her kids fixed up a room for her at their house on the first floor and she never climbed a stair again. Now, in the last 10 years, Mom has had three hip replacements. The idea of living her remaining years relegated to the first floor simply isn’t an option these days.

"Ask your doctor about _____.": Direct-to-consumer drug advertising helps drive the “rising expectations” issue, as does the continued (but eroding) disconnect between what something costs versus what it’s worth: Lamisil, which treats toenail fungus, costs $290.99 for a 30-day supply (drugstore.com via epocrates.com). Who in their right mind, other than perhaps beauty queens, would spend $290.99 of their own money for this? But if it only “costs” a $25 copay, then what the hell?

There have been huge increases in technology costs as well, but these are also (IMHO) driven partially by the expectations game and partially by the cost/benefit disconnect. If your doctor can do the 64-slice CT scan rather than the 32-slice, even though it’s much more expensive, well why not? This phenomenon is also driven by other factors, including physician investors looking for other ways to make a buck and thus buying these machines. There is a town of 20,000 about an hour from here which boasts eight free-standing radiology centers. As a result, utilization of radiology services has gone up tremendously.

Lastly, although medical technology has made great strides, medical business technology remains a disaster. There are a number of small initiatives to create a national electronic medical record system, but there has been a serious lack of national leadership on this issue because (again IMHO) the concept of a new federal mandate (after both HIPAA and Sarbanes-Oxley) is anathema to a lot of people in Washington. As a result, there is incredible duplication of services (which, when radiation is involved, can be very dangerous), and physicians operating “blind” due to the lack of available patient history (including other drugs and prior adverse reactions). Also, we still have errors in prescriptions due to physicians sticking to their paper handwritten prescription pads.

Full disclosure: I am an executive of a health insurance company. There are plenty of policy debates out there regarding the American health insurance model which are (and have been) fair game for other threads… I would prefer to not revisit them here.