Wednesday, January 12, 2011

Health Care Costs Consume Nearly 18% of US Economy

According to Medicare/Medicaid Services annual report, health care costs grew to 17.6% of the US economy in 2009, or more than $1 out of every $6 spent in America. That's a new record, and it's also the greatest share of GDP dedicated to healthcare by any nation in the world.

Despite the fact that GDP declined 1.7% in 2009, health care spending continued to increase anyway.

In 2009, industrialized nations spent an average of 8.9% of GDP for healthcare expenditures, according to the OECD. Yet, in the US, it approached 18%.

This figure is beyond inefficient and is simply unsustainable. All of this spending takes money away from other vital sectors of the economy.

Americans spent $2.5 trillion on health care in 2009—or $8,086 per person—a 4% increase from 2008. That is more money spent per person than any other country in the world, by far.

The 4% growth in 2009 was down from 4.7% in 2008, the second slowest rate of growth in the history of the National Health Expenditure Accounts (NHEA) going back to 1960.

The recession led to slower growth in private health insurance expenditures and out-of-pocket spending by consumers, and to a reduction in capital investments.

However, health spending as a share of the nation's GDP increased by 1.0 percentage point, up from 16.6% in 2008, the largest one-year increase in the history of the NHEA.

One in seven Americans did not have health coverage in 2009, and Texas has the highest percentage of uninsured residents amongst all states (26%).

The one in seven figure is the same as the number of people officially listed as living in poverty in 2009, as well as the number of people receiving food stamps last year. So there is likely overlap here; there may be many of the same people in all three groups.

The good news in the report is that private health insurance premiums grew 1.3 percent in 2009, a deceleration from 3.5 percent growth in 2008 and the slowest rate of growth in the history of the NHEA.

From 1999-2009, health insurance premiums for families rose 131%, while the general rate of inflation increased 28% over the same period.

While Americans widely believe that our health system is the best in the world, the evidence says otherwise.

Life expectancy is an excellent measure of a nation's health. Yet, last year researchers at Columbia University report that the US is now 49th in life expectancy, putting it lower than a dozen other developed nations. We're even lower than many third world nations. And the US has been dropping in life expectancy tables for decades.

Infant mortality is good measure of a nation's health care system. In 2009, the National Center for Health Statistics ranked the US 30th in global infant mortality rates, behind most European countries, Canada, Australia, New Zealand, Hong Kong, Singapore, Japan, and Israel.

And out of 20 “rich countries” measured by UNICEF, the US ranks 19th in “child well-being”.

If it's not bad enough that the US has a failing health care system, it is also an inefficient system that just so happens to be the world's most costly.

Last June, the Commonwealth Fund, which researches and advocates for healthcare reform, reported that Americans spend twice as much on healthcare as residents of other developed countries, but get lower quality and less efficiency.

These problems are not new. They have existed for many years.

In 2000, the World Health Organization ranked the US 37th of 191 countries for "overall health system performance," 72nd for "level of health," and first for "health expenditures per capita."

When it comes to health care, Americans do not get what they pay for.

Ultimately, these costs are yet another albatross hanging on the necks of the US and its citizens. There are no signs that the spiraling costs of health care will slow down, much less regress.

The US is on the threshold of becoming the first-ever mass-geriatric society. For the first time in history, people 85 and older are the fastest growing segment of the population. Over the next 25-30 years, the number of people over the age of 65 will double to more than 70 million, or 20% of the population.

People that age use a disproportionate amount of health care. However, Medicare cannot sustain such a large population of people using such an enormous amount of health care. The system simply cannot sustain such massive expenditures.

The US is the fattest country in history. Fully two-thirds of Americans are overweight or obese. The nation is plagued by lifestyle diseases, such as heart disease, Type II diabetes, high blood pressure and high cholesterol.

Put all of this together and you have an aging, overweight, diseased nation and a health care system unable to cope with all of it.

Sooner than later, the cost of ill health, brought on by poor lifestyle choices, will overwhelm the nation's economy, which cannot sustain such a disproportionate amount of its spending on healthcare.

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