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Skyrocketing Health Care Costs Aren't Grandma's Fault

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For decades we've heard dire warnings that a swelling tide of aging baby boomers is poised to swamp the U.S. healthcare system, driving up costs and threatening the viability of government and private insurance programs.

But a new study published Tuesday in the Journal of the American Medical Association strongly undercuts the assertion that an aging population is primarily to blame for soaring health care costs. Instead, the study concludes, the overwhelming share of increased health expenditures can be traced to the higher prices that hospitals, medical professionals and drug companies charge to treat a wide swath of illnesses, from cancer to depression.

The study comes as the debate over how to reform the U.S. healthcare system remains possibly the single most contentious issue in American politics. The Affordable Care Act -- the 2010 law currently at the epicenter of that storm -- includes provisions meant to both trim costs and improve care. These measures include steps like cracking down on Medicare fraud, cutting reimbursements to hospitals with high readmission rates, and fining hospitals for poor care.

Opponents of the law have argued that the cost of caring for the tens of millions of new health care beneficiaries under Obamacare will outweigh these savings.

Although the AMA study is mostly silent on the health care law, the authors, led by researchers at The Boston Consulting Group and The Alerion Institute, have marshaled more than three decades of data to paint a bleak picture of a fractured system that is both increasingly unaffordable and under-effective. They make the case that something needs to change.

From 2000 to 2011, U.S. health care spending increased from $1.6 trillion to $2.7 trillion -- a big leap owing almost completely to factors other than increased demand, from the elderly or anyone else. More than nine in 10 of those dollars spent, the study found, paid for higher treatment and drug costs.

Costs incurred to treat some illnesses have jumped dramatically. The U.S. government, private insurance companies and patients collectively spent $109 billion in 2010 to treat heart conditions, for example. That's up from $72 billion in 2000.

More than $40 billion was spent to treat back pain in 2010, up from 22 billion in 2000.

Hyperlipidemia care costs -- treatment for high cholesterol and triglycerides -- jumped to $38 billion in 2010 from $10 billion a decade before. That amounts to a more than 14 percent annual growth rate.

All told, costs incurred from treating patients who suffer from chronic illnesses account for 84 percent of all health expenditures in the U.S.

"The attention given to rising Medicare costs is warranted, but chronic disease at all ages, not just those over 65, account for the lion's share of higher costs," said Hamilton Moses, a physician and management consultant who co-authored the report, in an interview.

Since 1980, costs have tripled, in real terms. Yet price increases have not translated into better care, the study found. By the starkest possible measure of health care success -- mortality rate -- the U.S. is slipping behind its peer countries.

Americans in almost every corner of the country die earlier, on average, than residents of other developed countries, with the difference most pronounced in the South, the study found.

This data, which repeats what was reported in previous studies, cannot be explained by any one factor. Less access to health care -- and fewer people with health insurance -- is almost certainly a factor, as are high rates of gun violence and relatively low rates of protected sex, as compared to Western Europe, for example.

The U.S. also has relatively few doctors, at least as compared to other wealthy nations, ranking 19th out of 25 peer countries in terms of primary care physicians as a percentage of the population.

The data offers one bright spot: The rate of health care cost increases has slowed, especially in the last few years. Were it not for the Great Recession, it's likely that cost growth would have dipped below economic growth for the first time on record.

Some of the decline is likely due to trends that pose other concerns, such as hospital consolidation, which increases efficiency but reduces patient choice and could hinder innovation.

And whatever the cause, the slowdown isn't likely to last. Spending on health care by the U.S. government alone -- a smaller subset of spending than examined in the AMA study -- is expected to increase 6 percent a year over the next decade, according to a recent report by government actuaries.

The authors predicted "modest" savings from the Affordable Care Act.

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