Sunday, October 26, 2008

Health Care Is Peaking

Last week’s health-care news provides the strongest indication yet of a decline in the health care sector. Drug maker Merck announced a reduction of 7,200 workers. The company blamed problems in product development for its cutbacks, but also conceded that consumer spending on drugs has declined across the board.

Less drugs means less illness, and not just because the purpose of drugs is to treat illness. Drugs also cause or contribute to a significant fraction of illness.

Drugs are declining. People are using over-the-counter drugs less often. Doctors are prescribing fewer prescription drugs, and patients are filling fewer prescriptions. The prices of some popular prescription drugs have fallen. It is getting harder to get insurance companies to cover expensive new drugs. Lobbyists six years ago could get government officials to force people to take drugs, but now those lobbying efforts are falling flat.

Drug sales have declined for two years in a row, and although the declines are tiny, they are large enough to shake up an industry that, much like the automobile industry, thought it was guaranteed to continue growing year after year.

But drugs are only a small part of the health care sector. A stronger indication of a decline in health care would be mass layoffs at hospitals. And that is exactly what happened last week. Thousands of workers lost their jobs in instant layoffs at university and community hospitals. Typically, the hospital was laying off 1 percent of its staff. Most were east of the Mississippi, but I also found reports of hospital layoffs in Texas and California. All of the layoffs seemed to be the result of the same trend: a declining number of patients. Some hospitals blamed the decline on expansion at competing hospitals, but the same kind of decline also occurred in counties that have only one hospital.

Press reports have suggested that the decline in health care is the result of consumers getting squeezed economically, yet that contradicts past experience that says that health care is “recession-proof.” Indeed, venture capitalists are investing record amounts of money in health care in the belief that it is one of the few growth opportunities in the current economy. Yet no business can expand without a growth in customer spending, and consumers show little indication of wanting to spend their lives in the health care system.

Most of the “growth” in health care is really just the expansion of facilities, which is happening because hospital boards and investors are looking too superficially at demographic trends. Yes, it is true that the U.S. population is growing and aging. Yes, past experience suggests that this would lead to a greater need for health care. But it would be a huge mistake to imagine that the 70-year-olds of 2010 will be the same as those of 1990.

The whole culture has changed. In the 1980s most people thought that physical activity was undignified for an adult. Now the thought is that physical activity is necessary for survival. The cultural idea of acceptable muscle mass has increased, especially for women. In the 1970s, a woman who showed any muscle at all was quite unfairly thought by many to be grotesque. By 2000, women who failed to show at least an average level of muscle definition were being accused, equally unfairly, of anorexia. The perception of cigarette smoking has gone from a nuisance to an offense as the total numbers of smokers has declined by half. (Smoking was banned in Pennsylvania workplaces last month, and people say, “Really? That was just last month? Are you sure that wasn’t five or ten years ago?”) In the last five years there have been substantial declines in other vices, most notably beef and beer. Food labeling has improved so that the average consumer is now aware of fat content and trans fats. Technology has improved the quality of everything from drinking water to shoes. Wonder Bread went from being the most popular bread 30 years ago to going bankrupt last year.

A best-selling book, Natural Cures “They” Don’t Want You to Know About, and one of the top movie documentaries ever, Sicko, have forever changed people’s ideas about health. People know longer base their health strategies on the idea that the doctor will have something to make them feel better. Instead, people are looking for ways to live better — and increasingly finding them. Those who invest in the current boom in health care are betting against the ingenuity of the American people. That is not likely to be a winning bet.

I hate to see the massive expansion projects going on at so many hospitals when I know that half of the hospitals in the country will close in the next 30 years as demand for health care falls off. And it is not a case of the builders getting ahead of the growth curve, as in the overbuilding of retail space 20 space. Some stores that were built 20 years ago are just now being occupied. But some of the rooms that hospitals are adding this year will never be occupied.

It seems to me that the venture capitalists are wrong again, and that health care is peaking right now. Drug use and hospital visits are declining already. Doctor visits and medical tests will be next. The threat of unemployment will hasten this trend. People who know they can’t afford to be sick take fewer risks with their health — and once they learn how to be healthy, they won’t suddenly stop when the economy improves. Fifteen years from now, we will look back on this period and say, “How did we ever let the health care system grow so big?”

It’s a trend that Michael Moore, the filmmaker who made Sicko, talked about when that movie was released. Seeing the stories he captured in his movie inspired him to take charge of his own health. The change is obvious if you look at Moore this year and compare that to the way he looked four years ago, which you can see in his newly released movie Slacker Uprising. Moore may still not be the picture of health, but he has a healthy glow now that tells you he is twice as healthy as he used to be. Nearly all of us will be making the same change in the coming years as cultural changes push us in that direction. People think I’m exaggerating when I say that the demand for health care will fall by half. But that’s what’s going to happen.