Friday, April 3, 2009

Healthcare Spending Control

This is a direct and real threat to the American Economy and the American way of life. When various stakeholders in the debate on health reform attempt to discuss pay for performance, and cost controls that are needed. It is a direct result of spiraling healthcare costs that have far exceeded GDP growth, even in good times.

How Much Does the U.S. Spend on Health and How Has It Changed? The U.S. spends about $7,400 per person on health care each year. Sixteen percent of the U.S. economy is devoted to health care. The United States spent $2.2 trillion on health care in 2007. Spread over the population, this amounts to about $7,421 per person (Figure 1). This $2.2 trillion represents 16.2 percent of the nation’s total economic activity, referred to as the gross domestic product or GDP. While these figures are themselves staggering, of principal concern is their rapid growth over time.

Health care spending is consuming an increasing share of economic activity over time.Health care grows faster than many other sectors of the economy and thus its share of economic activity has increased over time. For example, whereas the education, transportation, and agriculture industries may, on average and over time, grow at rates close to the economy as a whole, health care does not. In 1970, total health care spending was about $75 billion, or only $356 per person. In less than 40 years these costs have grown to $2.2 trillion, or $7,421 per person. As a result, the share of economic activity devoted to health care has grown from 7.2 percent in 1970 to 16.2 percent in 2007. By the year 2018, the Centers for Medicare and Medicaid Services (CMS) projects that health spending will be one-fifth of GDP (20.3 percent).

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Qkwan said...

I think the increase in spending has paralleled the increase in obesity and increase in technology. With increased technology we are able to intervene in more ways and help people live longer. At the same time, all that technology has allowed us to do less manual labor and have ready access to way more calories than we need.
So, "in the good old days" people performed more physical work (built in exercise), ate less, and doctors had fewer treatments to offer them. Of course it cost less money!

physasst said...

True, but we need real healthcare cost constraint, and reduction. We simply cannot allow costs to continue to increase at the rate they currently are.