|Source: VHI Healthcare, Annual Report 2009 |
Rising Health Costs: Health
care spending in the United States grew 4.0% in 2009, to $2.5trn, $8,086 per
person or 17.6% of the nation's Gross Domestic Product (GDP). The level was up from 16.6%
in 2008 - - the slowest rate of growth in the 50-year history of the National
Health Expenditure Accounts (NHEA), due in great part to the economic recession
a report published last week by the NHEA.
The Organisation for Economic
Cooperation and Development (OECD0 said last June that in its mainly developed
member countries, total spending on health care was rising faster than economic
growth, pushing the average ratio of health spending to GDP from 7.8% in 2000
to 9.0% in 2008. Factors pushing health spending up - - technological
change, population expectations and population ageing - - will continue to drive
cost higher in the future.
In some countries the recent
economic downturn, with GDP falling and healthcare costs rising, led to a sharp
increase in the ratio of health spending to GDP. In Ireland, the percentage of
GDP devoted to health increased from 7.5% in 2007 to 8.7% in 2008. In Spain, it
rose from 8.4% to 9.0%.
Governments of most OECD countries
shoulder the lion’s share of healthcare costs. The share of government
expenditure devoted to health increased in most countries, rising from an
average of 12% in 1990 to an all-time high of 16% in 2008.
New medical technologies are
improving diagnosis and treatment but they also increase health spending.
OECD Health Data
2010 shows that there has been rapid growth in the supply and use of
computed tomography (CT) scanners and magnetic resonance imaging (MRI) units
used for diagnostic purposes. MRI units per capita more than doubled on average
across OECD countries between 2000 and 2008, reaching 13 machines per million
population in 2008, up from 6 in 2000. The number of CT scanners rose to 24 per
million population, up from 19 in 2000. The number of MRI units per capita is
much greater in Japan, the United States, Italy and Greece than in other
countries. These countries, along with Australia and Korea, also have more CT
MRI and CT scanners are expensive to buy and to operate. There are big
differences in their use per capita - far more in the United States than in
Canada, France or the Netherlands. The rapid growth in these diagnostic
procedures over the past decade in the United States has raised concerns that
some imaging may not be useful. To reduce unnecessary procedures and cut costs,
many OECD countries are trying to promote rational use of costly medical
In the US, President Obama's health
reform program remains the subject of controversy.
Republican leaders have put
the cost of the program “when fully implemented” at $2.6tn and said it
would “add $701bn to the deficit in its first 10
The nonpartisan Congressional Budget
Office (CBO) says
that the Republican plan to repeal the Obama program would add $230bn to federal
budget deficits over the next decade.
Last week the Irish State health
insurer VHI Healthcare, hiked annual premiums by up to 45%.
Vhi Healthcare lost almost 120,000 customers in 2009 and it lost
lost a further 48,000 subscribers last year. The claims ratio, i.e.
payment for medical care as a percentage of earned premium, came to 98.7%, which
it said is significantly higher than competitors which is below 80% and is 61%
for Aviva Healthcare.
VHI’s average healthcare spend per
customer was €900 which is twice the level of its market competitors due to the
age profile and health status of its customers.
Health spending is a bottomless pit
and a difficult area for politicians to reform given the demands of ageing
Peter Singer, a professor of
bioethics at Princeton University,
wrote in The New York Times Magazine on the sensitive issue of rationing
that: "The death of a teenager is a greater tragedy than the death of an
85-year-old, and this should be reflected in our priorities. We can accommodate
that difference by calculating the number of life-years saved, rather than
simply the number of lives saved."
On a lighter note, he said:
"Remember the joke about the man who asks a woman if she
would have sex with him for a million dollars? She
reflects for a few moments and then answers that she
would. 'So,' he says, 'would you have sex with me for
$50?' Indignantly, she exclaims, 'What kind of a woman
do you think I am?' He replies: 'We’ve already
established that. Now we’re just haggling about the
price.' The man’s response implies that if a woman will
sell herself at any price, she is a prostitute. The way
we regard rationing in health care seems to rest on a
similar assumption, that it’s immoral to apply monetary
considerations to saving lives - - but is that stance