Report: Rising Health Care Costs Causing Serious Economic Woes

Skyrocketing health care costs are taking a toll on the nation’s long-term economic well being, requiring an immediate “multipronged solution” before the “window of opportunity” to address the issue closes, according to a new report by the Government Accountability Office, the investigative arm of Congress.

The report, Long Term Federal Fiscal Challenge Driven Primarily by Health Care, was prepared Gene Dodaro, the acting U.S. Comptroller General. He says the federal government is on an “unsustainable long-term fiscal path” driven primarily by rising health care costs.

“Rapidly rising health care costs are not simply a federal budget problem,” the GAO report says. “Growth in health-related spending is the primary driver of the fiscal challenges facing state and local governments as well. Unsustainable growth in health care spending also threatens to erode the ability of employers to provide coverage to their workers and undercuts their ability to compete in a global marketplace.”

“The large fiscal gap is primarily the result of spending on Medicare and Medicaid, which continue to consume ever-larger shares of both the federal budget and the economy,” the report added. “Federal expenditures on Medicare and Medicaid represent a much larger, faster-growing, and more immediate problem than Social Security. Medicare and Medicaid are not unique in experiencing rapid spending growth, but instead this growth largely mirrors spending trends in other public health care programs and the overall health care system. A number of factors contribute to the rise in spending, including the use of new medical technology and market.”

Complicating the long-term economic issue the country faces is the fact that for years the federal government has financed other federal initiatives with surpluses in Social Security trust funds placing a heavy burden on taxpayers.

“When such borrowings occur, the Department of the Treasury issues federal securities to these government funds that are backed by the full faith and credit of the U.S. Government,” the GAO report says. “Although borrowing by one part of the federal government from another does not have the same economic and financial implications as borrowing from the public, it represents a claim on future resources and hence a burden on future taxpayers and the future economy. If federal securities held by those funds are included, the federal government’s total debt is much higher — about $9 trillion as of the end of fiscal year 2007.”

Last week, the Senate Finance Committee convened a hearing to hear testimony about the rising costs of health care and the burden it’s placing on the economy.

Dodaro testified about the issue and said immediate health care reform is essential in order to alleviate the current fiscal woes. Providing taxpayers with affordable health care is the cornerstone of the Sen. Barack Obama’s presidential campaign.

Peter Orszag, director of the Congressional Budget Office, who also testified before the Finance Committee, said, “health care spending is the single most important factor determining the nation’s long-term fiscal condition.”

“Our political system arguably is not particularly effective at addressing gradual long-term problems such as rising health care costs and aging,” Orszag told the Finance Committee. “But the problems caused by rising health care costs are not just long-term ones. In fact, some of them are already having significant effects on various aspects of our society. Health care costs are already reducing workers’ take-home pay to a degree that is both underappreciated and at least partially unnecessary, consuming roughly a quarter of the federal budget, and putting substantial pressure on state budgets (mostly through the Medicaid program), thereby constraining funding for other governmental priorities.”

Orszag said the federal government has dealt with the economic crisis by continuing to borrow heavily from other countries, which he said might not be sustainable. He said the Bush administration officials and lawmakers have ignored the country’s dire financial condition for far too long, comparing the situation with an individual who remains in a dysfunctional relationship.

Sen. Max Baucus, (D-Montana), the chairman of the Senate Finance Committee, said that since 1975 healthcare spending per capita has outpaced overall economic growth at a rate of 2.4 percent faster in Medicare, 2.2 percent faster in Medicaid, and 2 percent faster in other health related areas.

“Unless we act, in 2030, the Federal budget deficit will grow to more than 10 percent of the economy,” Baucus said during the hearing last week. “In 2050, it will be more than 22 percent of the economy. And by 2082, it will exceed 54 percent of the economy. These deficits would dwarf the post-World-War-II record of 6.3 percent in 1983. If we control healthcare costs, then along with prudent policies for the rest of the budget, we will be able to control Federal budget deficits. But if we fail to control healthcare costs, it won’t matter what else we do in the rest of the budget. We will have no hope of keeping Federal budget deficits under control.

The GAO report confirmed Baucus’s economic predictions.

“Health care costs are growing much faster than the economy, and the nation’s population is aging,” the GAO report says. “These drivers will soon place unprecedented, growing, and long-lasting stress on the federal budget. Absent action, debt held by the public will grow to unsustainable levels.”

Baucus is trying to pass legislation that will prevent physicians from taking a 10.6 percent Medicare cut, which is expected to take effect July 1. Lobbyists representing doctors warned that if the legislation goes through doctors would no longer see Medicare patients.

The GAO report emphasized, “Growth in health-related spending — Medicaid and health insurance for state and local employees and retirees — is the primary driver of the long-term fiscal challenges facing the state and local governments.

“If unchanged, the federal government’s increased spending and rising deficits will drive a rising debt burden,” the report says. “At the end of fiscal year 2007, federal debt held by the public exceeded $5 trillion. This growth in the federal government’s debt cannot continue unabated without causing serious harm to the economy. In the last 200 years, only during and after World War II has debt held by the public exceeded 50 percent of [gross domestic product].”

The GAO has recommended tax increases and spending cuts to deal with the issue. But in an election season it’s unlikely either presidential candidate would embrace the idea. Moreover, Sen. John McCain, the presumptive Republican presidential candidate, said he would not only make President George W. Bush’s tax cuts permanent if he were elected but would also look at other ways he can lower taxes.

Still, the GAO report says, “policymakers could phase in the policy changes so that the tax increases or spending cuts would grow over time and allow people to adjust.”

“Delaying action would make future adjustments even larger. Under our alternative simulation, waiting even 10 years would require a revenue increase of about 45 percent or non-interest spending cuts of about 40 percent. This gap is too large to grow out of the problem. To be sure, additional economic growth would certainly help the federal government’s financial condition, but it will not eliminate the need for action,” the report says.

Baucus agrees that the issue requires immediate attention, however, it’s unlikely that lawmakers will take action to address the matter until after a new administration takes office in 2009.

But by then the issue will no doubt worsen, the GAO report says.

“The longer action on reforming heath care and Social Security is delayed, the more painful and difficult the choices will become. Simply put, the federal budget is on an unsustainable long-term fiscal path that is getting worse with the passage of time. The window for timely action is shrinking.”

Jason Leopold is an investigative reporter and a two-time winner of the Project Censored award. He is the author of the National Bestseller, News Junkie, a memoir, and he has launched a new online investigative news magazine, The Public Record. Read other articles by Jason, or visit Jason's website.

15 comments on this article so far ...

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  1. evie said on June 24th, 2008 at 1:29pm #

    I can’t wait for “free” healthcare so I can pay for the fast approaching long-term and massive health problems about to hit the fan from Generation O (besity).

    “The GAO has recommended tax increases and spending cuts to deal with the issue.”

    Of course, that means more tax on the little sheople and trimming the fat, so to speak, from other programs, i.e. education, disaster relief, infrastructure… as we know “they” will not touch Defense funds b/c of the “war on terror.”

  2. Edwin Pell said on June 24th, 2008 at 3:44pm #

    I wish the discussion of medical care included facts. There are three type of medical need. 1) Care for young healthy people this includes things like childhood vaccinations, anti-biotic for strep throat, a cast for a broken arm, eye glasses, dental care, etc basically cheap stuff. I believe this should be universal covered by the state governments. 2) terminal medical care for old people. This includes things like heart by-pass surgery, cancer treatments, life long drugs for high blood pressure, live long drugs for the side effects of drugs, nursing homes, etc. I believe this is service that did not exist 70 years ago and the world went on just fine. I believe this is too expensive to provide and should be left to individuals that want to squander there wealth on doctor rather than giving it to there children 3) life long conditions like schizophrenia, failed kidneys, etc things that consume absurd amounts of money for little quality of life. I would not fund these. Just as 70 years ago they were not funded and the world went on just fine.

    Let’s limit government payment for drug to off patent drugs only That would be all drugs available in 1988.

    Let’s end the AMA monopoly. De-regulate health care providers.

  3. john wilkinson said on June 25th, 2008 at 11:22am #

    this is just what i’ve been talking about. single payer will not solve anything — it’s the tip of the iceberg. medicaid and medicare are single payer and they are part of the problem, because they pay these obscene prices without question (they’re too lazy, the corrupt govt bastards who never get enough of our tax dollars to waste on fraud and corruption), and the smaller players have to follow suit.

    the root cause is the blackmail of the medical community — if you don’t pay up whatever we ask, we’ll leave you by the side of the road to die like a dog. that’s what we’re dealing with. and lack of competition in the med field is the other synergistic half of this.

    “Baucus is trying to pass legislation that will prevent physicians from taking a 10.6 percent Medicare cut, which is expected to take effect July 1. Lobbyists representing doctors warned that if the legislation goes through doctors would no longer see Medicare patients.”

    this is what i mean — blackmail. except they probably won’t do it, medicare/medicaid is too much of their biz, and they are actually the enablers of this blackmail.

    we’re uninsured, so we see the outrageous prices for the littlest things, and no price standards. and of course double and triple billing, padding the bills with unnecessary things, etc. no rhyme or reason for these prices, it’s putting the gun to your head and saying pay up, that’s what it is. (and they’re the “epitome of morality and goodness” — NOT). look at your insurance statement when you go to the doctor.

    i came from socialized medicine. months with severe toothache with no relief in sight — have to wait in an endless line. passed out in dentist chair cause they didn’t use any anesthetics. recently asked dr.’s in canada about my wife’s gyno exam (we live near the border). yes, it’s cheaper, much cheaper, but guess what — she needs a referral from a general practitioner (for the annual ob-gyn exam!!) and then she has to wait A YEAR, or at least several months, depending on the doctor!!!

    and everybody’s affraid to say the obvious — what i’ve just said, that the emperor has no clothes, that we’re being raped by the med establishment, that they’re preventing any competition (why does a podiatrist need to know brain surgery?)

    and by the way, u — who’re insured — are already paying thru the nose, regardless — it’s being taken out of your paycheck, just cause u don’t see it u don’t complain. but it’s thousands and tens of thousands of dollars per year.

    so, either way, no good. radical changes necessary, above all COMPETITION so that this BLACKMAIL ceases. and stop the scandalous nonsense alogans about single payer solving everything.

  4. john wilkinson said on June 25th, 2008 at 11:28am #

    “Let’s end the AMA monopoly. De-regulate health care providers.”

    EXACTLY. But how do you do it when they’re through and through the system, they’ve corrupted everything — the state med boards, for example, who say you have to know how to operate on colon cancer if you’re an eye doctor, who say you have to see a Dr. for every small thing, who say you have to be RICH to be a DR., and spend a fortune and a lifetime till you get a license and can be gainfully employed. How do you fight this TOTAL corruption?

  5. john wilkinson said on June 25th, 2008 at 11:31am #


  6. john wilkinson said on June 25th, 2008 at 11:34am #

    “Let’s end the AMA monopoly. De-regulate health care providers.”

    And they also fix prices, too — so a de facto monopoly in something that’s vitally important to EVERYBODY. Woe is it to a Dr. who significantly undercuts his/her peers. He’ll be delisted.

  7. john wilkinson said on June 25th, 2008 at 11:41am #

    “2) terminal medical care for old people”

    old people don’t have other needs, beside terminal care? and younger people don’t sometimes have serious conditions, not just colds and broken bones? it seems you’d discard (maybe euthanize) everyone who’s consuming too much resources, anyone who’s not an uebermensch, aryan race? unless of course, YOU needed that, then you’d change your mind and make an exception.

  8. john wilkinson said on June 25th, 2008 at 11:46am #

    “Just as 70 years ago they were not funded and the world went on just fine. ”

    i am sure if we had a nuclear war and killed everything and everybody, the world will go on just fine. yeah, let’s do things the way they were done 70 years ago. let’s go back to slavery, etc., the world went on just fine.

  9. Edwin Pell said on June 26th, 2008 at 11:37am #

    John, what ever medical system is put in place there will be limits on how much is spent on an individual. Yes terminally ill people will receive hospice care not ten million dollar experimental treatments. My grand father had calcium deposits on his heart valves. The doctors were willing to operate. The said he had a 50/50 chance of surviving the operation. The operation would have cost the price of his farm. My grand father decided to give the farm to his son (my uncle) and went home. He died six months later. The sad reality is that with current technology we can not solve all medical problems. And there are some that we can solve but at a price we can not afford.

    p.s. there was no slavery in the U.S. 70 years ago (1938) you would have to go back about 140 years.

  10. Lloyd Rowsey said on June 27th, 2008 at 5:19am #

    Wednesday, June 25, 2008

    Cuba approves, makes available lung cancer treatment

    Cuban scientists said on Tuesday the first vaccine to extend lives of lung cancer patients has been approved by Cuban authorities for use and is available in the island’s hospitals. The drug, CimaVax EGF, has been shown to increase survival rates on average four to five months and much longer in some patients, they said in a news conference at Cuba’s Center of Molecular Immunology. In contrast to chemotherapy, the traditional treatment for lung cancer, they said CimaVax EGF has few side effects because it is a modified protein that attacks only cancer cells.

  11. John Wilkinson said on June 27th, 2008 at 8:32am #

    “The sad reality is that with current technology we can not solve all medical problems. And there are some that we can solve but at a price we can not afford. ”

    no quarrel from me there, edwin. i just thought your list of medical situations may not have been complete. and thanks for the example from your own life, it always helps to have real world examples to bring home what is meant.

    Other things I forgot to state is that the other players in the med field are in on the self-enrichment blackmail scam. The suppliers, the labs, etc. No rhyme or reason for the prices. Doctors complain about syringes that cost $120, when they cost about $5 to make. The hospitals pay 10 times the reasonable price for supplies like bandages, IV bags, what have you, and then turn around and charge you 20 times that price, and then on top of that double-bill (bilk) and triple-bill you for the same item. (Their billing “mistakes” are NEVER in the direction that they take a hit, it’s a mafia operation, and the govt assholes wasting our tax dollars don’t bother to regulate and fine and yank licenses). You need to hire a lawyer to go through hospital bills to try and recover the money stolen from you. Doctors too – if you’re insured, they’ll bill the insurance co. for imaginary or inflated things, I’ve seen it happen to me when I had insurance — X-rays charged for that were not performed, size of benign growth removed increased to double its actual size on the insurance form, etc.).

    Other signs of monopoly are abundant. For example, new patients pay more to see a doctor – in competitive fields they give you discounts to be their customer. You can never get information on the costs, on what ails you, etc., such an arrogant stance. Try asking ahead of time how much something would cost, even an office visit. They give you a bullshit, ambiguous answer. And then you get hit by lab fees which they didn’t tell you about, or didn’t themselves know about, fees which are several times the reasonable ones, or fees which are several times what you paid a year ago for the same thing but a different provider. (example: $55 for a pap smear test for my wife 2 years ago from provider A and $189 for the same thing this year from provider B). And the doctors, you have to pull information with pliers out of them, run after them asking questions as they hurry out the office to see another patient and make more money.

  12. evie said on June 27th, 2008 at 9:56am #

    Unfortunately, Cimavax has only been used on the terminally ill who have been through chemo,etc. Hopefully someone will some day develop a “vaccine” that prevents cancer – maybe this is a step in that direction.

    CimaVax has few of the usual chemo/radiation side effects – nausea and loss of appetite.

    I’m curious as to what the cost of treatment is, no price set on the drug yet, but have yet to see a cancer drug or treatment that’s cheap.

    If given only a few extra months I think I’d spend my money on some good weed and beer on a little stretch of beach I know in Masachapa, Nica.

  13. John Wilkinson said on June 29th, 2008 at 10:29am #

    i’ve read in a realiable source — $3,600+ is the average cost PER DAY of hospital stay. this is AFTER /BEFORE surgery. what in blazes do they do for that amount of money? even one tenth of that would be obscene. you get inedible meals, shared rooms, the nurse taking your temp and plugging in the IV? What do they pay the personnel proportionally who take care of a patient — maybe $100/day/patient? where does the rest of the money go?

    this is the outrage that goes on and on, because there are no cost controls. and it keeps escalating and escalating, as there are no brakes. the insurance companies pay w/o question, as medicaid/medicare pay without question, they are the biggest fish. and what about all the medicaid/medicare fraud — the single payers are contributing to price escalation by being asleep at the wheel and corrupt and lazy.

    btw, in addition to competition, we need the users to pay the costs, at least for routine, non-major care. that way they’ll see the end costs, shop around. so there should be high deductibles and ins. co. should be policed, no corrupt 5 million dollar salaries for them.

  14. Heather Davis said on July 8th, 2008 at 12:55pm #

    3) life long conditions like schizophrenia, failed kidneys, etc things that consume absurd amounts of money for little quality of life. I would not fund these. Just as 70 years ago they were not funded and the world went on just fine.

    First let me say that I had a kidney transplant and the “little quality of life” that you describe is hardly little. I was only 21 at the time I was placed on dialysis and rest assured, I continued to work. I was not like some of the patients that were unable to work or some who could and didn’t. My quality of life was great and my funds did not come from the government. Yes, patients are given medicare for 3 years post transplant, but let me tell you first hand that it certainly paid nothing for me. So before you start discussing this issue, I would like to know what your difinition of wuality of life is.

    Of course, unless you were placed in this siutation you might think differently.

  15. David Lentz said on July 27th, 2008 at 12:14am #

    The real issue is that the American people are sheep. No other people in the world would tolerate this situation. They would throw the doctors in jail for raising prices year after year by 8-20% for 20 years. America has the most powerful military in the world yet domestically Americans are the most wimpy people ever known to exist when it comes to their own welfare. They deserve what they get. Eventually the doctors will bankrupt this country and all of the companies will have moved the jobs oversees, and America will cease to exist. Destroyed by the domestic wimpyness of its own population.