How much health care inflation is in our future?
Even with inflation as measured by the consumer price index (CPI) at the lowest levels in more than 20 years, costs for medical care continue to rise at almost twice the rate. And the immediate future may see the rate of increase climbing higher and perhaps more sharply.
The Oklahoma Health Planning Commission anticipates a 38 percent increase in total health care expenditures over the next five years.
Data on which state estimates are based come from the federal Health Care Financing Administration (HCFA), an agency of the Department of Health and Human Services.
If the federal projections are correct, the state, after adjusting the national figures to fit Oklahoma's health profile, does indeed face a 38 percent increase between 1988 and the early 1990's, a planning division staffer confirms.
Admittedly, there are variables. Inflation, foreboding as ever, crowds the top of the list.
"If inflation takes off, all estimates will have to be revised," observes the planning commission's Jerry Prilliman. "That's a variable that really impacts."
How merciless it can be is seen in consumer price index reports issued by the U.S. Bureau of Labor Statistics. In 1986, for example, the index was a low 1.9. In the same year, however, its medical care component was 7.5 percent. That's the rate of increase.
Although health care costs are said to have moderated in Oklahoma during the past three years, experts still voice concern as they examine a range of potentially explosive issues.
- Acquired immunodeficiency syndrome (AIDS), which has reached epidemic proportions, certainly will claim a heavier share of health care dollars.
Officials at the state health department see the number of AIDS victims doubling within a few years. Treatment costs could reach or exceed $100,000 per case unless a dramatic turnabout occurs. Already, in some areas, costs have climbed to that level.
By mid-July, the state had reported 274 AIDS cases and 139 deaths. Figures aren't available on the number of human immunodeficiency virus (HIV) infections, a virus that ultimately leads to full blown AIDS, but health experts say there may be 20-50 HIV carriers for each AIDS patient.
- Medicare and Medicaid utilization is a more obvious inflationary component, along with hospitalization and home health care. Except in its role as an administrator of Medicaid, the state has little or no control over medical costs. Medicaid is a joint state and federal program for low income people. Medicare is wholly a federal program for the disabled and people 65 or older.
- Home health care, in the view of some health care economists, might possibly contribute to less hospitalization and perhaps lower nursing home costs at some point, but the commission's Prilliman says he has not yet seen data that would document any savings.
- "Age of the population is another variable," says Prilliman. "As the population gets older, that expanding group will have an impact on health care because it will require more health care services."
The state population over 65 already stands at 12.2 percent of the total and is rising. By 1990, according to estimates from the Oklahoma Department of Commerce, 12.7 percent of the state's people will be above the age of 65. Projections through 1995 suggest an additional 21 percent increase.
More to the point, 32 cents of every personal health care dollar spent in Oklahoma goes for the care of those 65 and older. The money is spent either by them or for them, the planners say.
In l985, the cost of nursing home care - reported at $462 million - was 10 percent of the state's total health care expenditures. An aging population obviously will have profound effects on future expenditures for long-term care.
Health care outlays in 1986 were estimated at $5.6 billion. By 1990, however, these outlays are expected to approach $7.3 billion in Oklahoma alone. Nationally, the Health Care Financing Administration projects expenditure levels at $647 billion, rising to $999 billion in fiscal 1995, and to $1.5 trillion by the year 2000.
Using the administration numbers, state analysts put Oklahoma's per capita share of the national health care bill at about 90 percent.
A national health planning law was enacted in 1974 to curb unnecessary expenditures, but was allowed to expire two years ago. It was under this statute that planning commissions and health systems agencies operated to monitor new construction, large hospital and nursing home expansion projects, and the acquisition of expensive technology.
Most states, including Oklahoma, kept their planning mechanisms in place, but revised the rules to ease certain restrictions after federal law was lifted.
"Our influence is not as great as it once was," admits Suzanne Nichols, the planning commission's director. "We do not review very much. . .unless they're spending $5 million or more."
In recent years, only two projects have exceeded the $5 million threshold ordered for planning commission review in this state.
Shortages of professional personnel and actions by providers may influence costs more than any other factors in the immediate future.
"I don't think we'll have much more significant capital put into the health care system," declares Nichols.
Access to health care remains a problem for many Oklahomans as it does for the rest of the nation. Although access is an economic issue, at least indirectly, alternative delivery systems such as health maintenance organizations (HMOs) could exert some downward pressures on costs.
The case for health maintenance organizations and other prepaid systems for delivering care rested on the premise that hospital admissions would be reduced by physicians whose incomes depended heavily on keeping people well.
Enrollment continues to increase in Oklahoma, despite a shrinking number of the organizations. One health maintenance organization failed last year and three others are phasing out this year. These actions will drop the number of groups from 12 to seven, according to the planning commission's Hank Hartsell.
Still, enrollments keep rising. In 1987, membership in Oklahoma stood at 169,000. Despite the failures, enrollments in the first quarter of 1988 had reached 175,000.
Hartsell said one health maintenance organization allowed its license to lapse without becoming operable.
Recent studies purport to show that fraud and abuse costs American health care consumers $45 billion or more every year. Clearly, fraud of one kind or another has plagued the big state and federal programs. But the federal government began to impose some order on the system in 1976 with the creation of the Office of Inspector General.
The current inspector general, former Federal Bureau of Investigation man Richard P. Kusserow, extracted a $4.4 billion settlement from the Paracelsus hospital chain last year for having collected expenses not related to actual Medicare costs. He also released a report disclosing that a study of hospitals found that, together, they had made a 14 percent profit in the treatment of Medicare patients.
Finally, the inflationary pressures of expensive medical testing has become a target of critics.
The American Medical Association (AMA) released a report last year charging that 80 percent of all doctors order many more tests than are necessary. They do it, the association said, not only for profit, but for legal protection as well - defensive medicine.
Dr. Edward R. Pinckney, editor of the AMA's own medical journal, and his wife Cathey, a cable TV health and medical editor, have said that half of all health care costs go for medical tests. These costs were estimated at $225 billion in 1985, and are still going up.
The Pinckneys argue that medical care costs could be reduced by more than $50 billion if government and private insurance reimbursement could be limited to tests with an accuracy rating of 80 percent or better.
Health economist Uwe E. Reinhardt of Princeton University notes that health care expenditures in this country exceed 11 percent of the gross national product. In Canada, the comparable figure is 8 percent, and in West Germany it's 9.5 percent. Both nations have national health insurance systems with built-in cost controls.
Reinhardt says Americans are unlikely to change the loosely structured pluralistic system in operation here for the cost control gains to be had by concentrating market power in the hands of fewer third-party payers, as the Canadians and Germans have done.
Given the dynamics at work here and elsewhere in the country, the experts seem to be saying that health care inflation remains an economic threat and likely will outrun the pace of consumer spending generally.…