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Aging Gracelessly

Can the United States devise a rational economic model for health care?

One of the great achievements of modern medicine has been the extension of the human life span. A baby born in America in 1900 could have expected to live around 50 years. A baby born here today can look forward to living, on average, about 80 years. Alas, she can also expect that, for a significant portion of those years, she will suffer from chronic, debilitating diseases. The personal and emotional costs of this qualified success are familiar to every family in the developed countries. But it is the aggregate economic and political cost, mounting past the point of sustainability, that soon will force a major change in the way the United States practices, finances, and distributes (indeed, even thinks about) medical care.

It is not new to say that the U.S. health care system is in crisis. In 1955, when the United States spent about 4% of its gross domestic product on health care, economists and policy makers worried that that was a significant and detrimental drain on productive investment. When health care expenditures exceeded 10% of GDP in the �60s, the system, again, was said to be in crisis. And in 1993, the Clinton administration, in attempting to reform health care, took on a system that was in crisis. Today the United States spends more than 13% of its GDP on health care. That proportion is predicted to rise to 16% by 2010 and to 20% by 2040. In a recent debate about legislation that added drug benefits to Medicare, the government program that provides medical care to the elderly, both liberals and conservatives spun alarming projections. Liberals, urging price control over pharmaceuticals, extrapolated wildly increasing drug prices and usage; conservatives, concerned about extravagant government subsidies, did likewise.

Such projections are pure speculation. Economists make up the numbers because they do not know what the cost and demand for health care will be in 2040 (or, for that matter, in 2010). The forecasts are intended to shock and surprise, to fuel a sense of looming disaster, and to drive reform. But there is no economic law that limits what human beings choose to spend to live longer, healthier lives. However elastic the price for a year of healthy life might be, its value is doubtless higher (for both individuals and society) than the most pessimistic health care economists care to assume. An economy and society that spent 30% of GDP on a medical-industrial complex would look very different than today�s economy—but it would not, in itself, be impossible.

So why a sense of crisis now? The answer is as much about opportunity as it is about risk. Technology and political economy have brought the health care system to a crisis, to a situation in which both the best and the worst ends are possible for medicine and health, for individuals, and for general populations. The technological promise of new therapies is accelerating—but then, so are rising costs. The potential of genomic medicine may be realized first in diagnostics and, subsequently, in drug molecules, but the legal and political foundations for intellectual property rights that support current business models in the pharmaceutical industry are strikingly insecure. Most crucially, the United States today pays for health care through an imperfect and convoluted insurance system. What is increasingly transparent—and has become almost everyday grist for political and economic debate—is the growing inequality and stunningly poor performance of coverage and outcomes.


Economics of Aging

Illustrating the costs of care.