Why We Should Celebrate High Healthcare Spending

Everyone seems to agree that healthcare is failing and that costs are too high.

It isn't, and they aren't. Healthcare is keeping us healthier longer than ever before, and the costs are skyrocketing because so too is demand.

This is reason to celebrate. We're living longer. We have access to incredible new medicines and treatments. We've become highly informed consumers who can access an immense world of medical information with just a few clicks. Illnesses and diseases that were certain death sentences just a short while ago can now be endured, managed, and beaten.

This is an historic triumph, but it's often overlooked in the droning arguments about "slashing spending." Healthcare is more expensive today because it is in demand -- demand that healthcare itself has created by its own successes, not least of which is the creation of an entirely new demographic of older people.

But reform is very much needed, and debates must move away from the blah blah about curbing spending and towards what is really driving the cost issues. The primary problem today isn't how much is being spent on healthcare, but who is spending and what they are spending on.

If we keep the healthcare reform discussion around "cutting costs," we risk cutting goods and services that people rely upon to live healthy, productive lives. And, just as importantly, we also risk cutting the research and development that is necessary to create tomorrow's "game-changers." When we focus only on cuts, we risk ending investments in R&D that may lead to much-needed breakthroughs.

Yet, to continue supplying the current, unprecedented level of healthcare, new payment structures and responsibilities need to be devised. In the U.S. and around much of the developed world, federal governments are growing increasingly incapable of paying the bill. For all the reasons listed above -- longer lives, better treatments, greater awareness -- demand will continue to soar, and projected spending is a fiscal impossibility.

In the U.S., the situation has recently been put into stark light by both the Government Accountability Office (GAO) and Goldman Sachs. Two very different institutions with two very different agendas, each studied the federal government's finances and both concluded that things must change. According to the GAO report -- a 270-page financial audit of the U.S. government's 2011 and 2012 fiscal years -- "the current structure of the federal budget is unsustainable." The tome isn't exactly a page-turner, but the conclusion is too significant to be ignored. After taking U.S. demographic projections and factoring these against the per capita federal expense for healthcare services, the number is, as they say, "unsustainable."

Goldman Sachs, meanwhile, reached a similar conclusion. Goldman, of course, is in the business of telling people where to put their money. Their new report endorses the "preeminence of the U.S. relative to other economies," but it offers this huge caveat: "The biggest hurdle to fiscal reform is a reduction in healthcare costs. Unabated, healthcare costs including Medicare and Medicaid will grow from 5% of GDP to 11% by 2042." It is interesting that, even against such daunting figures, Goldman Sachs is optimistic that the U.S. will figure it out.


First, notions of what it means to age need to align with 21st century longevity. When we live by routine into our 90s, why does 65 remain the benchmark age the federal government is responsible for picking up the healthcare tab? Healthcare has given us extra decades of life. Now we must use those decades to stay socially and economically productive so we don't repay that same healthcare system by bankrupting it.

Second, better consideration needs to be given to what we're paying for. With Alzheimer's, for example, there is a large and growing body of scientific evidence that shows that investments in research and development will pay dividends by reducing future costs of treatments and care. This is the case with other chronic conditions, too, like vision loss. Paying for research, drug development, and preventive treatments saves enormous sums in the long term. And this is what is so noxious about the "cut healthcare spending" arguments enjoying such repute today. If we cut now simply for the sake of cutting, then future costs are going to rise.

Sickness is more expensive than prevention. And both public and private payers need to lead the conversation away from cutting and towards investing.

In a moment when the U.S. is sharply divided, Europe is threatening to break apart, and emerging markets are searching for sustainable healthcare solutions, there doesn't seem to be a more widely accepted goal than "cutting healthcare costs." This is a lazy claim that elicits the wrong questions. Good leadership in healthcare, aging, and policy making would steer the conversation away from how much are we spending and towards who is paying for what?

Earlier on Huff/Post50:

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