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Spending on health care in the United States could double by 2017, reaching $4.3 trillion and accounting for 19.5 percent of the America's gross domestic product, a new US government report shows.
The report says that the outlook for US national health spending calls for continued steady growth. Spending growth is projected to be 6.7 percent in 2007, similar to its rate in 2006.
Average annual growth over the projection period is expected to be 6.7 percent. Slower growth in private spending toward the end of the period is expected to be offset by stronger growth in public spending. The health share of gross domestic product (GDP) is expected to increase to 16.3 percent in 2007 and then rise throughout the projection period, reaching 19.5 percent of GDP by 2017.
"Our expectation is that growth in health spending is expected to be steady over the projection, which is 2007 through 2017, at 6.7 percent per year," report co-author Andrea Sisko, an economist with the Centers for Medicare and Medicaid Services, said during an afternoon teleconference on Monday.
"At the same time, we are expecting economic growth to slow to an average annual rate of 4.7 percent. As a result, the combination of steady health spending growth and slowing economic growth will lead to the health care part of gross domestic product rising to nearly 20 percent by 2017, nearly one-fifth of the economy," Sisko said.
Sisko said that growth in public spending on health care will accelerate through 2017, while there will be a general decrease in spending by the private sector. "The acceleration in public spending growth is due to the leading edge of the baby boomer generation enrolling in Medicare," she said.
The fall in private spending growth is related to the expected slowdown in overall economic growth, Sisko said. In addition, the report authors are forecasting that disposable income will also fall during the period, playing a part in the slowdown in private health spending.
The increase in private health care spending will drop from 6.6 percent in 2009 to 5.9 percent by 2017, according to the report.
By 2017, the public Medicare system will cost $884 billion - just over one-fifth of all national health spending. This compares with a projected spending level of $427 billion for 2007.
Hospital spending is forecast to increase but gradually slow down through 2017, going from $696.7 billion in 2007 to more than $1.3 trillion in 2017. Prescription drug spending is forecast to slow down initially and then start to accelerate through 2017, Sisko said. Drug spending will increase from $231.3 billion in 2007 to $515.7 billion in 2017.
This year, Medicaid spending is projected to grow 6.8 percent to $361.2 billion. Over the next 10 years, the program is forecast to grow an average of 7.9 percent each year, reaching $717.3 billion or 16.8 percent of health spending by 2017, according to the report.
| The US National Coalition on Health Care says that by several measures, health care spending continues to rise at the fastest rate in US history.
In 2005 (the latest year data are available), total national health expenditures rose 6.9 percent -- two times the rate of inflation (1). Total spending was $2 TRILLION in 2005, or $6,700 per person (1). Total health care spending represented 16 percent of the gross domestic product (GDP).
U.S. health care spending is expected to increase at similar levels for the next decade reaching $4 TRILLION in 2015, or 20 percent of GDP (2).
In 2006, employer health insurance premiums increased by 7.7 percent – two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $11,500. The annual premium for single coverage averaged over $4,200 (3).
Experts agree that our health care system is riddled with inefficiencies, excessive administrative expenses, inflated prices, poor management, and inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and health insurance for employers and workers and affect the security of families.
National Health Care Spending
- In 2005, health care spending in the United States reached $2 trillion, and was projected to reach $2.9 trillion in 2009 (2). Health care spending is projected to reach $4 trillion by 2015 (2).
- Health care spending is 4.3 times the amount spent on national defense (4).
- In 2005, the United States spent 16 percent of its gross domestic product (GDP) on health care. It is projected that the percentage will reach 20 percent in the next decade (2).
- Although nearly 47 million Americans are uninsured, the United States spends more on health care than other industrialized nations, and those countries provide health insurance to all their citizens (4).
- Health care spending accounted for 10.9 percent of the GDP in Switzerland, 10.7 percent in Germany, 9.7 percent in Canada and 9.5 percent in France, according to the Organization for Economic Cooperation and Development (5).
- Employer and Employee Health Insurance Costs
- Premiums for employer-based health insurance rose by 7.7 percent in 2006. Small employers saw their premiums, on average, increase 8.8 percent. Firms with less than 24 workers, experienced an increase of 10.5 percent (3)
- The annual premium that a health insurer charges an employer for a health plan covering a family of four averaged $11,500 in 2006. Workers contributed nearly $3,000, or 10 percent more than they did in 2005 (3).The annual premiums for family coverage significantly eclipsed the gross earnings for a full-time, minimum-wage worker ($10,712).
- Workers are now paying $1,094 more in premiums annually for family coverage than they did in 2000 (3).
- Since 2000, employment-based health insurance premiums have increased 87 percent, compared to cumulative inflation of 18 percent and cumulative wage growth of 20 percent during the same period (3).
- Health insurance expenses are the fastest growing cost component for employers. Unless something changes dramatically, health insurance costs will overtake profits by 2008 (6).
- According to the Kaiser Family Foundation and the Health Research and Educational Trust, premiums for employer-sponsored health insurance in the United States have been rising four times faster on average than workers' earnings since 2000 (3).
- The average employee contribution to company-provided health insurance has increased more than 143 percent since 2000. Average out-of-pocket costs for deductibles, co-payments for medications, and co-insurance for physician and hospital visits rose 115 percent during the same period (7).
- The percentage of Americans under age 65 whose family-level, out-of-pocket spending for health care, including health insurance, that exceeds $2,000 a year, rose from 37.3 percent in 1996 to 43.1 percent in 2003 – a 16 percent increase (8).
The Impact of Rising Health Care Costs
- National surveys show that the primary reason people are uninsured is the high cost of health insurance coverage (9).
- Economists have found that rising health care costs correlate to drops in health insurance coverage (10).
- Nearly one-quarter (23 percent) of the uninsured reported changing their way of life significantly in order to pay medical bills (10).
- Almost 50 percent of the American public say they are very worried about having to pay more for their health care or health insurance, while 42 percent report they are very worried about not being able to afford health care services (11).
- In a poll conducted by the Harvard School of Public Health, 43 percent of respondents named high costs as one of the two most important health care issues for government to address (12).
- In a USA Today/ABC News survey, 80 percent of Americans said that they were dissatisfied (60 percent were very dissatisfied) with high national health care spending (13).
- One in four Americans say their family has had a problem paying for medical care during the past year, up 7 percentage points over the past nine years. Nearly 30 percent say someone in their family has delayed medical care in the past year, a new high based on recent polling. Most say the medical condition was at least somewhat serious (13).
- A recent study by Harvard University researchers found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000. The study noted that 68 percent of those who filed for bankruptcy had health insurance. In addition, the study found that 50 percent of all bankruptcy filings were partly the result of medical expenses (14). Every 30 seconds in the United States someone files for bankruptcy in the aftermath of a serious health problem.
- One half of workers in the lowest-compensation jobs and one-half of workers in mid-range-compensation jobs either had problems with medical bills in a 12-month period or were paying off accrued debt. One-quarter of workers in higher-compensated positions also reported problems with medical bills or were paying off accrued debt (15).
- If one member of a family is uninsured and has an accident, a hospital stay, or a costly medical treatment, the resulting medical bills can affect the economic stability of the whole family (16).
- A new survey shows that more than 25 percent said that housing problems resulted from medical debt, including the inability to make rent or mortgage payments and the development of bad credit ratings (17).
- A survey of Iowa consumers found that in order to cope with rising health insurance costs, 86 percent said they had cut back on how much they could save, and 44 percent said that they have cut back on food and heating expenses (18).
- Retiring elderly couples will need $200,000 in savings just to pay for the most basic medical coverage (19). Many experts believe that this figure is conservative and that $300,000 may be a more realistic number.
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