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In March 2010, the United States Congress passed and the President signed historic new health care legislation, the Patient Protection and Affordable Care Act (PPACA). The full impact of this complex bill, some parts of which will not be enacted until 2014, on medical practice and US health care expenditures will likely not be clear for many years. The passage of this legislation was preceded by a vigorous public debate on the US health care system and options for its reform. Complex arguments about the best way to organize, deliver, and pay for health care became the stuff of the daily news reports and editorials. Major participants in the health care industry and other interest groups jostled to advance their perspectives before the US Congress and the court of public opinion. One major reason for all this attention and the justification given for both supporting and resisting passage of this legislation was a widespread concern about the current and future costs of health care and tremendous uncertainty about the best way to control these costs.


In 2009, the United States spent more than 17% of its gross domestic product (GDP) on health care, amounting to approximately $2 trillion.1 Approximately 50% of this expenditure went for hospital care or physician/clinical services. Drug therapy accounted for another 10%. Four major reasons can be offered to explain why health care spending keeps increasing each year: (1) innovations that improve medical care2—the care of the cardiovascular patient in 2010 is vastly different (and largely better) than it was in 1980, but innovation in diagnosis and therapy generally increases costs relative to the prior patterns of care, as is reviewed in the second part of this chapter; (2) the aging of the population—an issue for all developed countries and one that has just begun to manifest itself (the baby boomers born in 1945 reached retirement age in 2010); (3) inflation, which refers to an increase in the cost of the same good or service (contrasted with an improved medical care service described in 1, above); and (4) raised expectations of the public regarding what medicine can and should offer them when they become ill, in part due to the global information revolution created by the Internet and search engines such as Google. Patients are no longer dependent on their doctor to tell them what is possible in a particular medical situation, and they are increasingly unwilling to accept limitations in care, particularly when they are shielded from the costs by insurance.


The cost of health care is not a unique concern for the United States. Other developed nations around the globe have all experienced unwelcome upward pressure on their medical care spending. Switzerland, France, Germany, Belgium, Portugal, Austria, and Canada all spend between 10% and 12% of GDP on health care. Many of the remaining countries of the European Union as well as Japan spend between 8% and 10% of GDP on health ...

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