Increased Health Care Spending Just Might Be Buying Higher Quality Care


Jonathan Cohn has looked at what appears to be a recent increase in health care spending (national health expenditures in the above graph) after a period of decline. Most likely this is due to a variety of reasons, and I don’t find it surprising that a period of decreased spending would be followed by increased spending. This is partially a sign of an improving economy as people are less likely to put off spending on medical problems when they have more money available. The increase in people covered by insurance this year due to the Affordable Care Act should lead to a further increase in spending, but this spending is desirable

Cohn looked at a variety of possible causes but didn’t hit on the key point that increases in medical spending might not necessarily be a bad thing until late in the article:

It’s not always the case that spending more on health care is a bad thing. New or more treatments might alleviate suffering, reduce disability, or extend life—all of which have value. Providing insurance to more people, so that they are more secure financially, also has value. The reason to worry about high health care spending is that the extra money America spends doesn’t actually seem to buy America better health care. But, over the long run, the real goal of health care reforms should be a combination of restraining costs and improving quality.

Traditionally it has been true that we could not see benefits from increased spending compared to other countries, but there are factors in health care which could currently be causing increased spending compared to previous spending in the United States as well as increased quality. There has been a push for Medical Homes, increased payment for primary care services, and for increased attempts at payment of doctors based upon performance as opposed to fee for service alone. If doctors are given incentives to screen more for elevated cholesterol and do more to treat diabetic patients this would lead to increased spending, with this spending being beneficial.

Contrary to the argument that we were not seeing quality for our past spending, The New England Journal of Medicine reports this week that complications among diabetic patients have decreased between 1990 and 2010. The Annals of Internal Medicine also reports that between 1999 and 2010 the number diabetics has increased, with a decrease in the number who have the disease but are undiagnosed, and that treatment has improved. Both having more diabetic patients and providing treatment which results in better control is going to cost more money. It is too soon to have any data to see if there is a correlation between increased spending over the past year and quality of care, but I do wonder to what degree the trends I noted in the above paragraph are contributing to higher costs and how this might correspond with further improvements in the quality of care.


  1. 1
    David Duff says:

    Friendly warning! Do not, under any circs, imagine that more spending equals a better service particularly in health matters. From a report by the impeccable Institute for Financial Studies on our National(ised) Health Service:

    “Figure 4.3(a) shows that spending on the NHS has grown steadily in real terms. From April 1979 to March 1997 UK NHS spending rose at an average annual real rate of 3.2 per cent. Between April 1999 and March 2008 spending on the NHS grew by an average 6.3 per cent a year in real terms. According to the plans set out in Budget 2009 the average annual growth rate is expected to slow to 4.3 per cent between April 2009
    and March 2011.” p.19

    The system, needless to say is crap! And getting crappier by the day.

    When, oh, when, will you realise that governments, *of any colour*, cannot run a proverbial piss up in a brewery!

  2. 2
    Ron Chusid says:

    What do you mean “when will your realize?” I would not want government running either health care (as in the UK) or running a brewery. Obamacare continues private medical practice while ending rather serious abuses from the insurance companies, such as trying to only insure healthy people and dumping them if they get sick. That makes sense from the perspective of the insurance companies, but is not what we want to see. It sounds about as absurd as what we would probably get if government were to try to run a brewery.

Leave a comment