Friday, September 13, 2013

The Information Gap In Public Awareness Of Cost Drivers In Medicare

The three most cited causes for growth in Medicare costs in the media are GOP talking points.  The public believes that poor management by the government, along with fraud and excessive hospital charges are the major factors driving growth in Medicare costs.  They are usually associated with conservative efforts to propose "free market" solutions for containing healthcare costs and reducing budget deficits.  Only 6% of the public believes that new drugs and  technologies are a major factor in the growth Medicare costs.  This article provides some of the research findings which indicate that new drugs and technologies are responsible for 35-50% of cost growth in Medicare.

It is unfortunate, but not surprising, that the public is poorly informed by the media about the factors that are driving Medicare costs and the growth in healthcare costs in America.  When we realize that healthcare spending accounts for over 17% GDP, and a large share of government spending, it is more than unfortunate; it is a disaster.  No business would attempt to operate without a good understanding about its major cost drivers.  Our political system operates with the consent of a very poorly informed public. 

I would like to add a few points beyond the obvious conclusion that the media do a poor job of educating the public on important issues.  In the first place, it is not surprising the new technologies account for a large share of the increase in healthcare costs.  Most of the research that takes place in government and in private institutions is directed toward finding treatments for some of our most difficult to treat illnesses.  The growth in medical technology is consistent with the desire within the medical profession and in the medical industry to relieve suffering.  We would not want to reduce this effort, but we could be smarter about the use of drugs and treatments that do not work well, and we could also do a better job of price control.  Much of the basic research is funded by government, but the benefits from this research go largely to private firms that take advantage of the public research.

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