2009 August 23 Sunday
US Health Insurance Cost Trend Not Sustainable

Here's a trend that can't continue.

August 20, 2009, New York, NY— Nationally, family premiums for employer-sponsored health insurance increased 119 percent between 1999 and 2008, and could increase another 94 percent to an average $23,842 per family by 2020 if cost growth continues on its current course, according to a new Commonwealth Fund report.

The report, Paying the Price: How Health Insurance Premiums Are Eating Up Middle Class Incomes, State Health Insurance Premium Trends And The Potential Of National Reforms, finds that national reforms that slow health care cost increases by 1 to 1.5 percent per year would yield substantial savings for families and businesses across the country. By 2020, slowing the annual rate of growth by 1 percent would yield more than $2,500 in reduced premiums for family coverage, and slowing growth by 1.5 percent would yield more than $3,700 in premium savings compared to projected trends.

This is, parenthetically, an argument against letting in low skilled immigrants. Our basic standard of medical care is so incredibly expensive that any immigrant incapable of earning $100k per year is probably going to be a tax burden on the rest of us.

Obviously companies, families, and individuals are going to increasingly be unable to afford these rising costs. What will they do? The overwhelming majority will demand more medical spending by government. If Obamacare is defeated this year that does not mean the battle over a bigger government role is over.

The problem is that newer high tech treatments are incredibly expensive but patients expect them.

A recent study by Evergreen Re was completed in conjunction with Ingenix/Reden & Anders, Minneapolis. The study found that the frequency of members with paid claims greater than $1 million per 100,000 commercial members rose from 0.07 in the year 2000 to 1.1 in 2005, and will increase to 2.4 (low trend) and possibly 3.6 (high trend) by 2010.


The four largest sources of $1 million plus claims are premature babies/infants, organ transplants, cardiovascular disease, specialty drug therapies and cancer treatment.

For example, the number of organ transplants has doubled in the past 10 years. There are more than 100,000 Americans on the organ transplant list and approximately 25,000 solid organ transplants are performed every year. The average billed charges for a multiple organ transplant now approaches $775,000. In addition, bone marrow transplants, now used to treat some 70 different diseases, increasingly cost more than $500,000.

Who is going to tell people they can't have extremely expensive treatments?

What I'd like to know: What is the rate of treatment with organ transplants per million people per year in the US versus Canada, Britain, France, Germany? Similarly, how hard do other countries try to keep premature babies alive? I suspect a lot of the differences in health care costs between the US and other Western countries has to do with the costs-be-damned extremes we go to.

Share |      By Randall Parker at 2009 August 23 10:46 AM  Economics Health

tommy said at August 23, 2009 5:46 PM:

What is the per capita rate of premature births for Hispanics versus whites? Any idea?

A.Prole said at August 24, 2009 12:33 AM:

Wherever you see the public being fleeced by exhorbitant fees, it is a sure-fire symptom of one cause, namely a fundamental mis-match between supply and demand, which if not caused by rationing by scarcity is always due to the exploitation - to the maximum extent - of a monopolistic situation where potential competition is 'locked out' by means of state enforceable rules (which in the ultimate case are enforced by violence).
This realization is nothing new and as ever was mentioned by Adam Smith.
The real root of situation is the monopoly imposed on the profession and 'licenture' of the occupation of physician, surgeon and other medical practitioner imposed by a combination of the might of the AMA and other medical instiutions working hand-in-glove with government.'Competence' is the justificaion of this regime and has a very powerful hold on the public mind, thus, its unlikely that that the bulwark monopoly (giving astronomic wages to doctors whilst delivering equal and opposite costs to patients), will ever change.
Historically, formal registration of medical practitioners is no older than the 18th century 9compared to a medical profession of millenial antiquity).The present 'iron-clad duopoly' stranglehold of the AMA and US Government other the administation of medicine grew as symbiotic relationship after this fact, with the 'competence' clause being the enabler of the wholesale unjustified massive wealth transfer.
- The only solution is a completely free market in the establishment of medical schools, with medical schools being run purely for profit in terms of fee garnered per student - of course a level of 'competence' would be required.

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