Bold financial predictions for 2012: Health care will see boom | Economy | -- Your State. Your News.

Jul 04th
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Bold financial predictions for 2012: Health care will see boom

moneylogo040411_optBY WARREN BOROSON

Two things about our current health care system, writes economist A. Gary Shilling, “almost guarantee explosive growth.”

First, he points out, most Americans don’t pay directly for their health care, primarily financed by employer-sponsored insurance – or by the government through Medicare and Medicaid. That, plus the fact that it’s “my life” that’s involved means that, except for deductibles and co-pays, there’s no restraint on usage.

Besides which, many people participate in what he calls “recreational medicine” – they take a day off from work at full pay to visit a physician, at employer expense, because of a minor ailment.

Second, Shilling goes on, medical providers in pay-for-service plans have incentives to perform extra work: more office visits and procedures boost their incomes. “Defensive medicine,” he adds, “involving more procedures is also encouraged to avoid litigation over real or alleged mistakes.”

Shilling is president of A. Gary Shilling Co. in Springfield and a long-time columnist for Forbes magazine.

Other reasons why he believes that the demand for medical services in the U.S. will mushroom over coming decades:

*Aging population. Those over 65, he notes, make three times as many office visits per year as people under 45. The oldest of the 78 million postwar babies reached 65 in 2011, and the youngest will do so in 2029. The government estimates that Medicare and Medicaid expenses will leap from 5.6 percent of GDP this year to 7.1 percent in 2021 and 8.5 percent in 2029.

* Some 32 million more Americans will be covered by health insurance under the 2010 health-care law, an 11 percent net addition by 2019. shillingGary012312_opt

* More jobs. Increased demand for medical services in the years ahead will create jobs, Shilling believes, but not enough to absorb all the unemployed in an era of slow economic growth. So Washington may readily accept the creation of more health-care jobs than anticipated by the new health-care law, ranging from nursing-home attendants to brain surgeons. And slow growth and high unemployment, he predicts, will encourage the uninsured to join government health programs.

“You’re probably aware of the hordes of people now filing for federal disability benefits as soon as their unemployment benefits run out,” he said. 

*Little supply increase. Booming demand will result in the rapid growth of both medical personnel and facilities.

* Cost control pressures from government and employers will work to the advantage of big, profitable hospital systems with large campuses and expanding satellite facilities. Renewed growth in cheaper out-patient surgical and other facilities will also be a result of emphasis on cost containment.


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