Thursday, July 29, 2010

Americans Spend Less on Health Care, Follow Laws of Economic Gravity

Conventional wisdom says health care defies laws of economic gravity. Other economic sectors may fall, but health care demand never drops. An aging, sicker population and growing entitlement programs assures demand will always trump gravity. The laws of supply and demand don’t apply to health care.

The prolonged recession and intractable joblessness may be turning conventional wisdom on its head. Since last year, hospital admissions are down 2%, and patient visits to doctors have declined nearly 5%, and by 7.6% in May alone.

The trend may be picking up, as jobs with accompanying health insurance disappear.

More Americans are visiting retail clinics and urgent-care clinics, or treating themselves, in search of lower prices.

And another gravity-defying phenomenon is exploding. Last year the number of Americans with health savings accounts with high deductibles grew from 13 million to 18 million, a 38% jump. Project that growth rate out five years, and 63 million Americans will own high deductible plans.

Again, the laws of economic gravity are at play. HSA premiums are some 20% less than for comparable HMOs and PPOs. And when you are spending more of your own money for care, you visit doctors less, and you become chary about paying for elective procedures, like knee replacements.

The laws of economic gravity may apply to health care after all.

Source: “Americans Cut Back on Visits to Doctor,” Wall Street Journal, July 29, 2010.

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