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Let’s Talk Really, Really Big Numbers: How About $5.631 Trillion, For Example?

July 23, 2016
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Healthcare leaders will be asked as never before to help leverage IT to transform care delivery

As we reported earlier this week, the editors of Health Affairs published in their July issue the latest estimates of U.S. healthcare spending, developed and revealed by the actuaries of the federal Medicare program. As our news article noted, in an article entitled “National Health Expenditure Projections, 2015-25: Economy, Prices, and Aging Expected To Shape Spending and Enrollment,” the authors (Sean P. Keehan, John A. Poisal, Gigi A. Cuckler, Andrea M. Sisko, Sheila D. Smith, Andrew J. Madison, Devin A. Stone, Christian J. Wolfe, and Joseph M. Lizonitz), predicted that the percentage of the gross domestic product (GDP) spent on healthcare every year across the U.S. healthcare system will grow from 17.5 percent in 2014 to 20.1 percent in 2025, with total spending rising from $3.3013 trillion in 2014 to $5.631 trillion in 2025. That figure adds to the estimates that the Medicare actuaries had predicted in October 2014; back then, the actuaries had predicted that annual healthcare spending would reach $5.1588 trillion in 2023, and 19.3 percent of the nation’s gross domestic product.

This time around, the Medicare actuaries noted that, while the passage and implementation of the Affordable Care Act (ACA) had initially held down healthcare spending, “increases in economic growth, faster growth in medical prices, and population aging are expected to be the primary drivers of national health spending and coverage trends over the next decade.” Anyone who’s been following these trends for some time will note that every one of those factors is very difficult to bend the curve on, and all are immensely complex phenomena.

But let’s go back to the marquee numbers here, shall we? Because, seriously, anyone who isn’t astonished to see or hear or the figure of $5.631 trillion—yup, that’s trillion with a “t”—isn’t fully awake.

What the Medicare actuaries are saying is that, within the span of 11 years, beginning in 2014 and ending in 2025, total U.S. healthcare spending will have increased by nearly 70 percent. That’s right—nearly 70 percent. And that’s huge—really huge.

The reality is that our nation’s total healthcare spending—federal, state, and private, with a tiny fringe of self-pay—is already on the edge of unsustainability, at current rates of spending. Even Medicare and Medicaid (which is in fact 50-plus Medicaid programs, plural) are already too expensive; specifically, Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and Affordable Care Act (ACA) marketplace subsidies together accounted for 25 percent of the federal budget in 2015, or $938 billion out of $3.7 trillion of federal spending, according to the Center on Budget and Policy Priorities, while Medicaid spending on the part of all government entities in the US. was $492.3 billion in fiscal year 2014, according to the Kaiser Family Foundation.

And now, with the aging of the population and an explosion in chronic illness nationwide, the numbers are set to get bigger—and bigger—and bigger. Seventy percent bigger within last than 10 years from now. So what do we, as a country, do about that?

One major breakthrough that partly bent the cost curve in the past few years was the passage of the Affordable Care Act, which has given more than 12 million more Americans reliable health insurance, and has already, at least temporarily, bent the healthcare inflation curve—unsurprisingly so, since many of those millions of uninsured ended up accessing care in hospital emergency departments, resulting in pain and suffering for those Americans, and in unnecessarily inflated costs for everyone, as ED care at unnecessary and avoidable levels of acuity, is bad for all of us.

On a more comprehensive level that involves the conscious manipulation of the healthcare payment system in order to force change, the Affordable Care Act, as well as the MACRA (Medicare Affordability and CHIP Reauthorization Act of 2015), and a few other pieces of legislation, have set into motion tremendous change, including a massive shift away from uncontrolled, unmanaged fee-for-service, and towards value-based care delivery and purchasing under the Medicare program, and, inevitably through imitation, among private health insurers as well. And therein lies one of the main answers to what we as a country might be doing, since we’re already doing it; and that is, massive internal healthcare system reform. Avoidable inpatient readmissions? Penalized. Poor outcomes and inefficiency? Docked. Pure physician fee-for-service payment? Banished. And, with the meaningful use program under the HITECH Act (the Health Information Technology for Economic and Clinical Health Act)—the physician portion of which will now be shifted to a new set of requirements under MACRA/MIPS (the new Merit-based Incentive Payment System for physician payment under Medicare), further levers have been put in place to compel hospitals and physicians forward towards automation, in order to further improve efficiency, effectiveness, and cost savings in U.S. healthcare.




Coudn't agree more Mark with the entire article, particularly: "Because, in order to bend that five-and-a-half-trillion-dollars-plus annual expenditures curve even a little bit, will require a massive investment in, and successful implementation of, excellent health information technology. What’s more, it will require the extreme optimization of healthcare delivery and administration processes, using those IT tools, solutions, and systems. U.S. healthcare can simply no longer afford to be a trillions-of-dollars-a-year “mom and pop shop”-type cottage industry."

The answer can often be found in using the right math - for example in infusion therapy, using math to schedule right and get predictive visibility can lead to 20 - 30% more patients served with the same infrastructure in place - here's why you need complex math to solve this problem

Same goes for OR scheduling, Inpatient Beds optimization - all the really expensive assets hospitals and healthcare providers have spend trillions on already and may not be maximizing utilization for.

Love the article, well done!

Thank you very much, sanjeev. I agree. The level of data analysis taking place now in U.S. healthcare will need to be optimized towards true "precision analytics," in order to get clinical and operational performance to newly high levels, and begin to transform the healthcare system. Thank you.