[Aging] citizenry plays only a minor role in the projected jump in costs ...

March 13, 2008 | Will Boomers Bankrupt Our Health Care System? Myths and Facts
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This brings me to Princeton economist Uwe Reinhardt’s speech on the very first day of the conference. The only American to speak at WHCCE, Reinhardt focused on what he called “the folklore that people bring to the health care policy table." By nature an iconoclast, Reinhardt spent the next 20 minutes shattering some of the myths that have become part of the received wisdom among policy-makers.

Begin with the notion that an aging population is a major factor driving health care inflation. In the U.S. this is accepted as a justification for why the nation’s health care bill now equals more than $2 trillion dollars—and why we must expect it to climb ever higher.
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Here, we see that the U.S. spends close to $7,000 per person on care—even though its population is younger than the citizens of most developed countries, including Germany, Italy and Japan. ... Meanwhile, Japan’s population has been graying for some time, yet it spends only $1,000 per person. Could eating fish really make that much difference?
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It turns out that when you look at estimates of growth in health care spending from 1990 to 2030, a senescent citizenry plays only a minor role in the projected jump from $585 billion (what we laid out for health care in 1990) to $14,026 billion (what analysts say we’ll ante up in 2030, assuming we continue in our profligate ways).

What will be the biggest factor pushing the tab so much higher? Innovation. “The health care industry will continue developing new stuff for every age group,” Reinhardt explains. Will that “new stuff”—in the form of new drugs, devices, tests and procedures—be worth it? Some of it will be. Some won’t. Indeed as this article from Health Affairs reveals, over the past twelve years, rising spending on new medical technologies designed to address heart disease has not meant that more patients survived. In many areas, we seem to have reached a point of diminishing returns. This also is true in the drug industry, where most new entries are “me too drugs”—little different from products already on the market.

As I have often discussed on this blog, it is usually suppliers, not “patient demand,” that drives health care inflation. The big ticket items are not the ones patients ask for; they’re the ones companies advertise—or that doctors and hospitals tell us we need. Few chronically ill patients ask to be hospitalized; not many cry out for dialysis, or the chance to spend thousands on cancer drugs; it’s the rare person who asks if he can die in an ICU.

“In truth, the aging of the population is not a big problem,” ...
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Finally, Sweden offers proof that an aging population doesn’t have to spell financial disaster. The second day of the conference I interviewed Mona Heurgren, an economist at Sweden’s National Board of Health and Welfare, and she pointed out that “while we have the oldest population in the EU, our health care costs haven’t been rising. Over the last 15 years or so, the share of our citizens who are older has been growing, yet health care spending has stayed level at about 9 percent of GDP.”

How has Sweden managed the buck the trend? For one, 95 percent of the country’s hospitals and doctors use electronic medical records which guarantee many fewer errors, and much greater efficiency. (As of three years ago, only 15 to 20 percent of U.S doctors’ offices and 20 to 25 percent of U.S. hospitals had implemented electronic medical records, and adoption continues to move slowly as we try to decide who should pay for health care IT).

Moreover, in Sweden, preventive care is free. So no one is tempted to skip a needed Pap Smear. Diabetics go for their eye check-ups. In the U.S., by contrast, many 50-something patients put off care that they can’t afford, waiting until they reach the magic age of 65, and qualify for Medicare. At that point, the catch-up care they need can be very expensive and in some cases, their health has been permanently damaged. ...