In an Ideal World, How Much Would We Spend on Health Care? – The Health Care Blog

BY BEN WHEATLEY

We have heard it said before, and it is no longer shocking to say, that in 2021 the United States spent $4.3 trillion on health care. To put this gaudy number in some perspective, we measure it as a share of our economy and report that health care comprised 18.3% of our gross domestic product. CMS projects that health care will approach 20% of GDP in coming years—one-fifth of everything we buy and sell in this country. 

In a recent report, the Health Affairs Council on Health Care Spending and Value said that “it is unclear what percentage of GDP would represent the ideal level to devote to health care. Nevertheless, the council believes that the current expenditure and rate of growth are higher than they should be….” The council observed that the dollars devoted to health care seem “disproportionate to the health they produce” and noted that the spending places a “significant burden on families, employers, employees, and government.”

We spend approximately $12,900 per person per year on health care. By comparison, the average cost of health care per person in other wealthy countries is only about half as much.

These metrics seem to indicate that the United States is spending too much on health care, but nevertheless we struggle to identify the “right” amount. However, if someone were to ask me: “In an ideal world, how much would we spend on health care?” I would propose a very simple answer: zero. This is because, clearly, in an ideal world, no one would be sick.

You may argue that this is a bit of sophistry. Obviously, we don’t live in an ideal world, we live in the real world, and here on planet earth, sickness and dread diseases are rampant. According to this world view, sickness may be viewed as intrinsic—a fundamental feature of the imperfect world that we live in. But I am an optimist by nature. I believe that it’s possible to reduce the burden of illness, and that our explicit objective should be to reduce the burden of illness to zero. 

In 2001, the Institute of Medicine released Crossing the Quality Chasm: A New Health System for the 21st Century. Everyone remembers the six aims: care should be safe, timely, effective, efficient, equitable and patient-centered. But this was only the report’s second recommendation. The first recommendation said this: “All health care organizations, professional groups, and private and public purchasers should adopt as their explicit purpose to continually reduce the burden of illness, injury, and disability, and to improve the health and functioning of the people of the United States.”

Our explicit purpose should be to continually reduce the burden of illness. I would simply make one addendum: our explicit purpose should be to keep moving in this direction until the work is done. That is, until the burden of illness has been removed. Even if we believe, fundamentally, that this objective is unachievable, what would be the harm of adopting it as our goal? Making it the direction that we want to go. Even in the real world, I believe our explicit aim should be to reduce the burden of illness to zero—enabling spending to follow in that direction. 

Patenting the Sun

On March 26, 1953, American medical researcher Dr. Jonas Salk announced on a national radio show that he had successfully tested a vaccine against poliomyelitis, the virus that causes polio. In the two years before the vaccine was widely available, the average number of polio cases in the US was more than 45,000. By 1962 that number had dropped to 910. As the incidence of polio declined, spending on polio-related care also declined. 

Polio was once one of the most feared diseases in the U.S. The virus can spread from person to person and can invade an infected person’s spinal cord, causing paralysis. The virus paralyzes muscle groups in the chest, making it difficult to breathe. The medical apparatus most commonly associated with polio was the iron lung, which in the 1930s cost about $1,500—the average price of a home. 

An interviewer once asked Salk who owned the patent to the polio vaccine. Salk famously replied, “Well, the people, I would say. There is no patent. Could you patent the sun?”

Polio has been eliminated in the United States, but it has not been eradicated globally. It still exists in certain parts of the world.  At the World Health Summit in 2022, the Bill & Melinda Gates Foundation announced it would commit $1.2 billion to support efforts to end all forms of polio globally. Bill Gates has said: “We have what it takes to finally wipe polio off the face of the earth.” However, he does expect to be repaid. Gates told CNBC, “We feel there’s been over a 20-to-1 return.” 

Science is beginning to yield amazing cures for intractable diseases. Wired magazine announced in late 2022 that “The Era of One-Shot, Multimillion-Dollar Genetic Cures Is Here.” The article profiled a gene therapy called Hemgenix, which gained FDA approval in November 2022 for the treatment of patients with severe hemophilia. The therapy overrides a DNA mutation that causes spontaneous bleeding episodes, some of which are life-threatening. “Unlike most drugs, which relieve symptoms, gene therapy addresses the underlying cause of a disease.” The therapy appears to offer a complete cure, at least in some cases. However, it is not yet clear whether one shot will last for a lifetime. At $3.5 million for a one-time dose, Hemgenix is now the most expensive drug in the world. 

The company, CSL Behring, said the price was determined by considering the “clinical, societal, economic, and innovative value represented by this novel gene therapy.” And they received the backing of the Institute for Clinical and Economic Review, “the nation’s drug pricing watchdog.” ICER estimated that Hemgenix would be fairly priced at $2.9 million. ICER gathers testimony, reviews evidence, and seeks to ensure that Americans “stop paying far too much for the drugs that do far too little.” However, they assert that “pharmaceutical companies that develop highly effective drugs will still be handsomely rewarded.” Under this model, savings to the system are generated, but kept in private hands. 

Our Current Trajectory

Health care spending in the US is already exorbitant, even before the introduction of these novel new therapies. Nearly 1 in 10 adults currently owe significant medical debt. More and more, employers are indicating that health insurance is too expensive to provide to their employees. And the nonpartisan Congressional Budget Office warns that a fiscal crisis is looming if debt levels continue to rise as projected. Healthcare costs are a major driver of the national debt.

It is important to recognize that not all health innovations are expensive. Take, for example, the pasteurization of milk. Milk used to be a common source of the bacteria that cause tuberculosis, diphtheria, typhoid fever, and other foodborne illnesses. The incidence of disease outbreaks associated with milk has fallen dramatically since pasteurization became widespread.

Moreover, sometimes the profit motive slows innovation down. A Canadian start-up modified the psychedelic DMT to treat depression and a recent study revealed very promising results. However, the study “failed to excite investors.” The founding partner of a venture capital firm said, “these results are extremely promising, but they had no effect on the share price, zero.”

Sam Altman, the chief executive of OpenAI (which brought us ChatGPT) thinks psychedelic drugs will revolutionize mental health care and addiction treatment. However, the business model is not there yet. Amy Emerson, CEO of another company in the same space, noted that profitability depends on things like making sure insurers cover the drug, developing billing codes for the therapy, and training clinicians to administer it. “All of those things are a heavy lift,” she said. So, monetization is hindering innovation in some cases. 

A New Direction

In 2016, the Obama Administration launched an effort to “end cancer as we know it.” The Cancer Moonshot, initially funded at $1 billion, aimed to reduce cancer deaths by half within 25 years. “But in the costly world of biological research, such a sum may be better described as a cancer slingshot, researchers said.” “We’re not going to the moon on $1 billion.”

In 2022, President Biden relaunched the Moonshot and his most recent budget includes $2.8 billion for the effort. However, cancer research is one of the items targeted for cuts in the current debt ceiling fight. Regardless of your political persuasion, it seems fair to say that health care is bumping up against serious financial constraints. Consequently, we need to be open to “disruptive technologies and business models that may threaten the status quo.”

Bringing the burden of illness to zero is (admittedly) a highly aspirational goal. But it can also serve as a gauge on how we’re doing in the present. For GPS to work, you have to enter in the correct destination. Our aim should be to bring the burden of illness to zero, enabling spending to also decline.

Ben Wheatley has 25 years of experience working in health policy with organizations including AcademyHealth, the Institute of Medicine, and Kaiser Permanente.