Health Care Cost Inflation and its consequences

Health care cost increases in America basically actually start with simple inflation - standard, everyday, very basic, run of the mill, completely normal cost inflation. The frst level cost driver every year for health care is identical to the foundational cost driver for all other American industries - pure, ongoing, and routine inflation of the basic costs of doing business in this country.

Salaries in health care settings go up every year, just like they do in every other segment of the economy. Heating and energy prices go up every year. The costs of construction, postage, transportation, essential goods and services, and facility maintenance go up every year for everyone. At a very basic level, all of the hundreds of thousands of independent businesses who deliver health care face the same set of inflation factors as every other business in America. They use the same electricity and buy the same paper clips and copy machine paper as every other business in America.

So when we ask why health care costs go up faster than normal inflation, we need to start with the logical and - when you think about it - fairly obvious fact that cost increases in health care start with the same basic inflation rates as every other area of the economy.

Health care is facing serious worker shortages in quite a few categories of the work force. Many other industries have a surplus of available workers. Health care does not. Health care currently hires its work force from a shrinking and increasingly inadequate pool of skilled health care workers. Why is that relevant to annual health care cost increases? Workplace shortages naturally increase the cost of labor in health care at a slightly higher rate - because any economist can tell you that worker shortages in any industry tend to create additional wage inflation in that industry for those specifc categories of workers.

So annual wage and salary increase rates for a large proportion of the actual jobs in the health care work force currently tend to be a bit higher than average wage inflation levels for jobs in most other American industries. What are the most relevant health care work shortages? Many articles and studies have been done that describe the worker shortage in some detail.

We have a signifcant nursing shortage in many areas of the country. Pay for nurses on the West Coast of the United States has had an inflation level higher than other jobs in that same geographic area for the last several years.

We also have shortages of lab techs, radiation techs, medical assistants, medical radiographers, medical transcriptionists, pharmacists, pharmacy assistants, physical therapists, dentists, dental hygienists, and dozens of other health care support positions that require various levels of specialized training.

Current vacancy rates in a wide range of health care job classifcations range from 5 percent to 18 percent - and those defcits are expected to increase signifcantly over the next fve years.

Some of the biggest current future worker shortfalls are in a couple of medical specialties. We are on the verge of a huge shortage of primary care physicians. We need primary care doctors to do the basic and fundamental work of making sure patients receive optimal care. Most other western countries have over half their physician work force in primary care.

In the United States, we now have less than 40 percent of our doctors in primary care practices - and the really alarming information we need to recognize is that only two percent of the medical students in America who picked medical school residencies in 2008 selected primary care as their specialty of choice.

The number of geriatricians is also shrinking, going from 9,000 in the country a decade ago to less than 7,000 today. Our population is getting older, and the number of geriatricians is shrinking.

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Health Care Cost Inflation and its consequences

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