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Health care issues: Medical cost inflation

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A look at key issues in the health care debate:

THE ISSUE: Why do medical costs increase at a rate faster than inflation?

THE POLITICS: Health care spending over the past year increased by 3.2 percent even as overall consumer prices dropped 2.1 percent. That’s not unusual in the United States, where health care spending rises at rates substantially higher than inflation. Analysts agree on any number of reasons for the increases, but tend to disagree on which cause is most responsible. Among the reasons:

_Americans get too much unnecessary care — too many tests, treatments and hospitalizations that do not improve their health. The reasons for this vary: Many doctors have a financial interest in new technology, doctors and hospitals fear malpractice lawsuits and patients are indiscriminate consumers because they are shielded from health care costs through insurance or government health plans.

_Easy access to expensive new medical technologies.

_Inefficient health insurance companies with high administrative costs that don’t have anything to do with actual health care.

_Unhealthy living habits that strain the system, including smoking and obesity.

WHAT IT MEANS: Curbing the rising costs of health care is at the heart of the current debate on overhauling the nation’s health care system. Rising costs have placed Medicare, the federal government insurance program for the elderly, on an unsustainable trajectory that would be responsible for exploding government deficits. The 2009 Medicare trustees’ report estimated that Medicare’s giant trust fund that pays for hospital care will become insolvent in 2017. At that point, income from payroll taxes will cover only 81 percent of projected costs. The insolvency date moved up two years as a result of the recession.

Employers and their workers have met with rising health insurance costs that are straining business and family budgets.

_ By Jim Kuhnhenn

© 2009 Associated Press. Displayed by permission. All rights reserved.

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