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Strategies abound for holding down exploding health care expenditures. But which will prove most effective?
For decades, aggregate U.S. health care costs have risen far beyond the growth of the rest of the economy. From 1940 to 1990, health care spending increased at a rate of roughly 4 percent a year, rising from 4.5 percent to 12.2 percent of the U.S. gross domestic product; Health Affairs reported earlier this year that overall health care costs in 2006 represented 16 percent of GDP.
Employers are feeling the crunch. Last fall, the consulting firm Towers Perrin projected that health care costs for U.S. employers would increase by 6 percent in 2008 to a total average cost of roughly $9,144 per American worker.
Those increases have the potential to slow down large sectors of the American economy, says Neeraj Sood, an economist for RAND Corp. who studied the impact of health care costs from 1987 to 2005. "Big industries with a high benefit share grew slower when health care costs were rising," Sood says.
The continuing growth of health care expenditures also represents a challenge for advocates of universal coverage. Rick Pollack, executive vice president for the American Hospital Association, says that I unless health care providers, the federal government and other players embrace a wide variety of cost containment strategies, universal health care coverage will be nearly impossible to achieve.
"I don't think we get to coverage without addressing affordability," Pollack says. "Policy-makers and the public are going to be reluctant to expand coverage to the 47 million Americans without it. You've got to give people confidence that we're working on affordability."
Republican presidential candidate Sen. John McCain, who supports pay-for-performance strategies as well giving patients a broader role in their health care choices, has made controlling costs the centerpiece of his health care plan. At a Mayo Clinic-sponsored conference earlier this year, McCain economic adviser Douglas Holtz-Eakin argued that rising cost, and not universal coverage, is the central problem facing the American health care system.
"Reform not focused on cost is wrong. Insurance is a mechanism for shifting around who pays," Holtz-Eakin said. "The problem is that the bill is too big."
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