Commentary: Bringing light to the heat of the health care cost debate

In each decade, one or two public policy issues emerge as thematic. In the 1960s, for instance, it was civil rights and Vietnam; in the 1970s, it was energy and “stagflation”; in the 1980s, tax reform; in the 1990s, welfare reform; in the 2000s, terrorism. For our current decade, health care has come to dominate.

Utah mirrors the nation on this. In a 2016 statewide survey, Utah Foundation found that health care was the number one concern of citizens, ahead of air quality and education. The tone of the debates on health care costs, the uninsured and the role of government in health care have become hotly emotional.

Money is never more than a step or two removed from the frustrations citizens feel about the state of health care today. Complaints about the state of health care tend to center on rising costs. And yet the average citizen’s understanding of what’s happening in the health care arena is often vague at best.

To demystify this issue and bring sobriety to the health care debate, Utah Foundation has begun a series of reports untangling the health care cost picture. The first installment, issued this month, looks at the cost of health care provision itself, whether paid through insurance, by government or by individuals.

For Utah, there’s a lot of good news.

To begin with, Utah has the nation’s lowest per capita health care spending. Our healthy demographics work strongly in our favor. We’re a young state with an active population that avoids destructive habits such as smoking.

Another factor keeping costs down: Utah’s hospitals admit inpatients at the lowest rate in the nation. We also have the shortest average hospital stays in the country. Part of this may owe to the fact that our hospitals have kept the supply of hospital beds low; we have the second lowest number of beds per capita in the country. Part of it may owe to responsible inpatient policies among our hospitals.

However, one other factor in our low-cost profile is Utah’s high rate of uninsured citizens, a pattern that is also pervasive across the Sun Belt states. Uninsured citizens are less like to seek medical care — sometimes even when they should — but this helps to keep health care spending down.

Still, medical costs in Utah, as in the rest of the nation, have been on the rise, far outpacing inflation. As a practical matter, that means Utahns have been spending an increasing proportion of their income on health care.

What’s driving up medical costs? Perhaps the biggest factor is the quickly escalating price of medical technology and prescription drugs. In 2014 alone, prescription drug spending in the U.S. jumped 12.4 percent.

Another factor may be overtreatment. Patients may ask for unnecessary tests or treatments. Doctors may overtreat for fear of lawsuits. And patients may receive name-brand drugs when generics would have sufficed.

Medical consolidation has been proceeding rapidly in the U.S. While consumers might expect lower prices as a result of economies of scale, the negative effects of diminished competition appear to be a more powerful force.

Administrative burdens and red tape are also a growing factor. Most physicians in the U.S. now spend more than 10 percent of their time on paperwork. And one health care official told Utah Foundation that a major Utah health provider had to double its administrative compliance staff after the passage of the Affordable Care Act in 2010.

Finally, using data collected by the state, Utah Foundation found significant price differences among Utah hospitals for common procedures. In looking closely at some of them, we were unable to account for the differences.

Citizens and the medical industry alike need to take a hard look at these price differences. And state government ought to continue its efforts to bring more transparency to the health care cost picture. With a clear understanding of the challenges facing the medical industry, all chaotic energy surrounding health care can be channeled into constructive solutions.

Peter Reichard is president of Utah Foundation, a nonpartisan, nonprofit government research organization. Reach him at peter@utahfoundation.org. Utah Foundation’s report, Bills of Health: What’s Driving Medical Service Costs in Utah? can be found at utahfoundation.org.