Health Care Spending: $1 of $5 in 10 Years

by Tula Connell, Feb 27, 2007

During Bush’s State of the Union address last month, we all found out Bush’s solution to the nation’s health care crisis: Take away the employer-provided health care from the few in this country who have decent coverage by taxing it out of existence. Oh, and kill Medicare.

Meanwhile, the crisis continues.

In fact, health care is expected to account for $1 of every $5 spent in the United States in another decade, according to the Centers for Medicare and Medicaid Services (CMS) and the Associated Press. Hat tip to the Alliance for Retired Americans for this item. Notes the Alliance, which represents 3 million U.S. seniors:

Today, the number is closer to $1 out of every $6. That means a rise in out-of-pocket expenses, such as the co-pays for medicine, from about $850 this year to about $1,400 in 2016, a 5.3 percent annual increase. By the year 2016, annual spending on health care will total nearly $4 trillion. In 2006, health care spending was $2.1 trillion, the economists estimated. Income will play a significant role in the greater health spending. Historically, when income rises 1 percent, health expenditures go up about 1.5 percent, officials said. America’s per capita health spending is the highest in the world.

But while our nation spends the most on health care, the returns in the form of care and numbers of people covered are the worst, as Princeton economist Paul Krugman has noted repeatedly. While “every other advanced country somehow manages to provide all its citizens with essential care,” Krugman writes, the only reason universal coverage seems hard to achieve here is the spectacular inefficiency of the U.S. health care system.”

In a recent column in The New York Times, Krugman points out:

McKinsey & Company, the consulting firm, recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting—costs that don’t exist in single-payer systems.

Bet those big bureaucrats have all the health care they need?

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