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Sunday, July 24, 2011

Health Care Costs are Coming Down!

It sounds like a nursery rhyme, but it's actually true.

Avery Johnson of the Wall Street Journal reported on an investor conference of Goldman Sachs in June of this year, in which major insurers discussed an unprecedented downward trend in medical spending.  This has led to increased profits for insurance companies, but uneasiness in the many industries that live off of the abundance of excessive medical costs.

Specifically, hospital income is down 2-15%, costs associated with doctor visits are down 7%, and though patients are visiting quick care type providers more often, they are less likely to fill the prescriptions they receive at those visits. Simply put, people are going to the doctor less, they are spending less time and less money in the hospital and are taking less medications.

Humana reported and increase in profits of 30% and Aetna 42% since the patients they are insuring are costing them less money despite the fact that they raised premiums quite a bit last year. Eventually these profits will be limited by the provisions of the health care bill, so they will probably lead to reductions in health insurance premiums, but  not this year.

The articles I read reported debate about whether the reduction in health care spending was just due to the economic downturn and was likely to end with a rebound as the economy recovers, but the magnitude of the decrease suggested something more permanent. Some data indicates that patients are considering costs more often when deciding on medical options and are looking at alternatives to standard medical care. Substantially more people have health plans that include very high deductible costs which fuels these considerations.

It will be very interesting to see if this voluntary reduction in health care spending can be correlated to a change in overall health. The patients who go to the minute clinics with their colds and flu and are prescribed antibiotics which they do not actually take may be well served by their "noncompliance". It seems to me that whenever a patient goes to a clinic like this with a cough or a sniffle they leave with an antibiotic, and if they take that antibiotic it is not uncommon for them to get some sort of side effect. Antibiotics are really only useful for a small subset of coughs, those due to pneumonia or to exacerbations of chronic lung disease, sometimes they help with sinus infections, and they are never useful in viral infections.

It seems most likely that this trend in health care spending is due to the fact that patients and doctors are starting to consider costs as part of what is relevant in making medical decisions. It seems like the fact of uncontrollable medical costs continuing to spiral upward is not a fact at all, but simply one of a number of possible futures. Decisions we make as providers and consumers are already having a significant impact on spending, and health care is in the process of reforming itself (though it definitely still needs lots of help.) Certainly widely publicized debate about the subject has influenced behavior. Although, or because, providers and consumers are still so confused about the provisions of the health care reform bill, they are changing their what they do in such a way that costs are already beginning to come down.

An article in the American Medical News reported on a few studies presented at the June meeting of the American Society of Clinical Oncology that looked at the financial impact on patients of treating their cancers. It is not uncommon for patients whose cancers do respond to chemotherapy to end of bankrupt due to costs. The first really effective drug to treat advanced melanoma, Yervoy, will cost $120,000 for 4 doses. Other common newish chemotherapy drugs are similarly expensive. Although insurance covers some of these costs, copays are significant. Many patients are simply not willing to bankrupt themselves or their families for the chance of a longer life. Studies such as these were not something I saw even a few years ago, and data like this certainly helps inform discussions of how to make medical decisions in a world where resources are limited.

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