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U.S. Health Spending: Where are we going? (Part 4)

By: | Tags: | Comments: 0 | September 28th, 2016

Over the last three blogs, we have tried to highlight not only what is going on in the U.S. healthcare industry today, but also the path we are heading to in 2025, and even 2030.  That path has healthcare cost doubling over the next 15 years, and consuming an even larger part of the U.S. gross domestic product (GDP).

We have noted the many warnings that the institutions are flashing from the Center of Medicare and Medicaid (CMS) actuaries to the U.S. Federal Reserve (FED).   The trend is shocking and may be part of the issue, along with the demographic changes predicted by those economic trends that are stalling non-healthcare U.S. growth, as mentioned in an earlier blog from January of this year.

Our fascination at the intersection of healthcare and economics is not only driven from our quarter-century immersion in every major part of healthcare, but also from our perspective advising on public endowments of over $250 million (USD) in investments.  We have access to the best and brightest advisors and investment opportunities worldwide.  This has been a labor of love, as the returns on these investments help change those millennials that we have talked about before.  This decade-long commitment, along with our perspective on the 77 million aging baby boomers, may give us a different perspective than some.  For one, we see that the baby boomers have changed the economics of the world for 70 years, more than likely this will continue for the next 20 years, and millennials are not like their parents.

As we published Part 3 of this series, the U.S. Labor Department on Friday September 16, 2016, reported that “U.S. Consumer Price Index rose 0.2% in August (2016).”  The headline was effectively double what the consensus Wall Street economist expected.  What was buried in the details was this:

“Medical care costs jumped 1.0 percent last month, the largest increase since February 1984, after advancing 0.5 percent in July.  The cost of hospital services surged 1.7 percent, the biggest gain since October 2015. Prices for prescription medicine soared 1.3 percent.”

Source: CNBC

In our previous blog, we suggested that based on FED data, we were in the forecasted inflection point of a major jump in healthcare cost that is directly related to the “aging of baby boomers over 65.”

What we would like to point out is that an aging world is changing what we consume as individuals, what we invest in, and how our governments plan for the future.  As we have discussed many times before, some people expect that healthcare in the U.S. “may” go from 17.2% today, to over 30% of GDP over the next 30 years.  Now, it might make more sense on how we closed our January blog, “if you are not into healthcare, technology, or technology driven solutions, tread carefully.”

As we go to press on this blog, the U.S. Federal Reserve Open Market Committee has announced that they will leave our interest rates the same, for now.  More than likely, we will add a fifth blog on this series, and conclude with the macro view that these last four blogs have discussed.  The question now is, how will this affect the U.S. and the world economy for the next quarter century?  Since we love this subject, we are now preparing some blogs that will discuss the implications of the pending U.S. Presidential elections for our U.S. healthcare industry.

I will end this blog as I did with the previous ones, asking “What is the solution?”

We think we know what will certainly help.

1. Reducing the cost of care by using more technology to collect, analyze, and make actionable.

2. Engaging the consumer with their own wellness in part by using more health IT.

3. Rewarding consumers for improving their own wellness and reporting their own data.

4. Promoting better care coordination between providers of care and their patients.

5. Advancing a more efficient and transparent system that reduces waste and administration.

6. Adopting a payment model to be more aligned with care, and less to do with visits.

– Noel J. Guillama, President

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