What is the Cost of Healthcare?
THREE TRILLION dollars was the amount of money spent on healthcare in 2015. Much of that three trillion dollars is related to the management of chronic disease. But new treatments on the near horizon may be able to stem these ever rising healthcare costs. And, that is in the form of stem cell therapy. Can tell cell therapy lower the cost of healthcare? We will get to that, but first let’s go over some numbers.
Cost of Healthcare: Pareto’s Law
Healthcare spending follows Pareto’s Law almost perfectly. Pareto’s Law, also known as the 80/20 Principle, states that 80% of an effect comes from 20% of the causes. For instance, it is not uncommon in business for 80% of the sales to come from 20% of the customers. In Pareto’s day 80% of the land in Italy was owned by 20% of the population. And, in this country 80% of the taxes are paid by 16% of the population.
It is not always exactly 80/20, but you get the concept. Things tend to be disproportionate when it comes to cause and effect. And, that is never more evident than it is with healthcare spending. Let’s look at this disproportionate spending in healthcare.
That $3 trillion we spend on healthcare represents 17.4% GDP. One-sixth to one-fifth of our economy revolves around healthcare. That probably is not healthy for a society. Spending that much money means ….. we kind of live in a sick society.
And, if we were to be honest, it’s not healthcare. It is sick care. Very little of that money is spent trying to get people healthy. But, there is little money in keeping people healthy. Nearly every stakeholder in healthcare makes money because people are sick – including most physicians.
Do you really think hospitals and pharmaceutical companies want a healthy population? They may want their own employees to be healthy (many hospitals have wellness programs for their employees) to minimize their own healthcare expense, but that’s about it.
Now get this. One percent of our population accounts for 25% of the healthcare costs and 5% account for 50%. Both numbers make Pareto’s Law look tame. Eighty-three percent of healthcare spending is spent on chronic disease which are largely preventable. US healthcare when it comes to acute illness and trauma is very good. But, we are not so good at managing chronic disease. We spend a lot of money on chronic disease without affecting outcome or quality of life very much.
When it comes to chronic disease we are spinning our wheels in the mud. And, that is because our treatments typically do not address the fundamental causes of the problems. Much of chronic disease is lifestyle related – which is not an emphasis or priority when it comes to medical training.
Plus, the medications used in chronic disease management do not cure. They control or manage symptoms while causing an array of side effects which many times require their own treatments. Consider this. Properly prescribed medication is now the 4th leading cause of death in the United States.
If anything, medications give patients an excuse not to change their ways or lifestyle. “I can eat this donut because I took my diabetes medication.” Or, “This medication will control my blood pressure. Now I don’t have to exercise or lose weight.”
And, that takes us to an important point. Patients bear responsibility for their health, and there is very little in the healthcare system that holds them accountable. But, that is another story for another article.
Impact of Chronic Disease on the Cost of Healthcare
The top chronic diseases that consume most of the healthcare dollars are:
- heart disease
- pulmonary disease
There isn’t anything on the list that most would find surprising. Heart disease and cancer have been number one and two killers for decades despite a proliferation of heart institutes and cancer hospitals. The incidence of heart disease and cancers is not going down. It is going up despite spending a staggering amount of money on those two diseases.
Yes, some people are surviving longer with some cancers and living better quality of lives with heart disease, but we are not winning the war on those conditions like we typically think when we say “winning”. And, we won’t win until we change our thinking and strategy.
In 2011 $109 billion was spent on heart disease, $88 billion on cancer, $75 billion on pulmonary disease, $75 billion on osteoarthritis, and $57 billion on diabetes. By 2030 the cost of treating heart disease alone is expected to exceed $1.2 trillion.
Throwing medication and medication at these problems is not the best answer. We are doing such a “good job” treating heart disease that one person dies of heart disease every 40 seconds.
In any other industry or profession people would lose their jobs with such a dismal track record. Have you ever thought about it that way? It is not that people are not trying, but we are not trying the best and smartest way.
When it comes to chronic disease we basically keep people alive in a perpetual state of illness while keeping them ever dependent on the healthcare system. It will either bankrupt the system or lead to rationing of care.
Also, for some chronic conditions there are no good conventional treatment options. Heart failure is one of them and refractory angina is another. Half the people with heart failure die within 5 years of being diagnosed. The treatment of choice for end stage heart failure is a heart transplant. Yet, many patients die will waiting for their heart transplant.
Chronic disease increases with age. Individuals 65 years old and older incur annual healthcare expenses 3 to 8 times greater than those under age 45. That’s not good, but it gets worse. The population over age 65 will grow 80% between 2010 and 2030. Which means healthcare costs – as high as they are now – are only going to sky-rocket unless something significant happens.
Healthcare costs are expected to increase 6.5% in each of the next two years, which is actually less than it has been, but still exceeds the rate of inflation. These costs cannot continue without creating a hardship on the system.
A real game-changer is needed.
Cost of Surgical Procedures (Cost of Healthcare)
Below are the costs of common surgical procedures used to treat many of the chronic conditions mentioned above. Costs come from Healthcare Bluebook. The costs are for procedures performed in my zip code.
You may wish to use this Healthcare Bluebook to get quotes on medical costs in your area. The costs includes hospital fees, surgeon’s fee, and anesthesiologist’s fee. It does not include the costs incurred from time off work (due to surgery and recovery) which in the worker compensation arena typically exceed the medical costs. It also assumes no complications.
- Total knee replacement $21,609
- Revision knee replacement $28,790
- Total hip replacement $21,680
- Coronary artery bypass grafts $39,709
- Coronary angioplasty $16,865
- Total mastectomy $14,085
- Partial mastectomy $15,615
- Abdominal tumor removal $18,729
- Surgical prostatectomy $12,744
- Heart transplant $152,831
*the cost of a partial mastectomy is more than a total mastectomy as it usually requires a day longer hospital stay which seems counterintuitive.
The costs of medications is variable depending how many medications a patient is taking and how many years they might be taking it. It is not unusual for patients to be on two or more blood pressure medications and/or two or more diabetic medication plus a cholesterol lowering medication. Frequent monitoring of the patient and periodic lab work is necessary. Multiple that by 20 to 30 years or more of treatment and the costs are significant.
Cost of Stem Cell Therapy
The cost of stem cell therapy is $5,000 to $7,000 for orthopedic problems. Insurance does not yet cover the cost of stem cell therapy as it is considered experimental. It is an outpatient procedure. In most cases a patient can return to work the next day as opposed to 4-6 weeks for a joint replacement. For the self-employed person that can amount to significant cost savings.
The improvement from stem cell therapy is not immediate and typically takes three to six months to see meaningful improvement. The main risk in adult stem cell therapy is an infection. And, that risk exists anytime the skin is penetrated regardless of the procedure.
Stem cell therapy is also being studied in the treatment of heart attacks and congestive heart failure. Much of the same technology used during stem cell treatment is the same as with traditional cardiac procedures and stem cell therapy does not necessarily provide an upfront cost savings.
But, early results from studies using stem cells show benefit above traditional treatment and results are expected to be longer in duration. This would mean over the long run stem cell therapy for cardiac conditions would be less than traditional treatments.
Stem Cell Therapy and FDA Regulation
The FDA regulates drugs and medical devices. When those regulations were written stem cell therapies did not exist, thus they were not written with stem cell therapy in mind, and that has hampered getting stem cell therapies FDA approved.
Pioneers in stem cell treatments are working with the FDA to develop rules and regulations specifically for stem cell therapy. But, for now stem cell therapies must meet many of the same criteria and thresholds that new drugs must meet to be approved.
Basically, the rules and regulations are not practical for stem cell therapies – the FDA is trying to fit a square peg into a round hole and stem cell researchers are doing the same to comply as best they can. It seems both sides recognize the all stakeholders and regulators must come together so that safe and effective stem cell therapies can become FDA approved.
Currently the FDA is overseeing over 600 IRB (institutional review board) studies in the United States to determine the safety and efficacy of stem cell therapy. Stem cell therapy has the potential to regenerate damage heart and lung tissue (and all other organs) in addition to damaged joints and holds much promise in treating cancers and neurodegenerative diseases like Parkinson’s and dementia.
We discussed in Stem Cell Therapy Clinical Applications areas that stem cell treatments are being studied.
The cost of stem cell therapy will eventually come down as more and more physicians perform the procedure and insurance most likely will cover treatment (as they will save money compared to above procedures) once studies show it is safe and effective and become FDA approved.
Already some stem cell centers are quoting 85% success rates in treating arthritis with stem cells which is comparable to the results seen with knee replacements with little downtime. Keep in mind stem cell therapy for arthritis is about 10 years old and still in its infancy in development while joint replacements have been done for over 50 plus years.
Will stem cell therapy be a game changer? Will it stem the cost of healthcare? Time will tell, but we believe it will.