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Costs Are Growing Fast

The cost of U.S. healthcare is high and growing faster than the economy as a whole.

In 2009, we spent over $2 trillion a year on healthcare—almost 3 times what we spent in 1990 and over 8 times what we spent in 1980 (Kaiser Family Foundation, U.S. Health Care Costs). The cost is expected to reach $4 trillion a year before 2015 (Kaiser Family Foundation, 2006). Healthcare prices rose more quickly than inflation and wages (Kaiser Family Foundation, U.S. Health Care Costs), and healthcare spending was growing faster than the economy as a whole even before the recent downturn. Healthcare was about 7% of the economy in 1965, is about 16% now, and will likely be 20% by 2016 (Kaiser Family Foundation, 2006). That means that of every $100 spent in the U.S., $20 will go to healthcare.

Most of what we spend on healthcare goes to hospitals (38%) and physicians (25%). Federal, state, and local governments foot almost half the bill to insure their employees, provide public insurance programs, and pay hospitals and providers for care to the uninsured. Private insurance companies pay about a third, and healthcare consumers pay 12% in health insurance premiums, co-payments, deductibles, uncovered services, and other out-of-pocket costs (RAND).

U.S. healthcare costs are much higher than other countries’ because the unit prices of what we use are higher (Anderson, et al., 2003): We pay more per doctor visit, hospital day, per prescription, etc., than people in other countries. Two reasons for increases in our already high costs are the rising numbers of older Americans, who use more health services, and the greater use of new technologies, which can be costly (RAND). Preventable medical mistakes, defensive medicine (where doctors provide extra care to defend against malpractice claims), and even the way we pay for care (for example, one service at a time) also contribute to our cost problem.

Sources

Kaiser Family Foundation. U.S. Health Care Costs: Background Brief. www.kaiseredu.org/topics_im.asp?imID=1&parentID=61&id=358.

Kaiser Family Foundation. 2006. Comparing Projected Growth in Health Care Expenditures and the Economy. May. www.kff.org/insurance/snapshot/chcm050206oth2.cfm.

Rand Compare. U.S. Health Care Today: Spending. www.randcompare.org/current/dimension/spending#section1.

Anderson, Gerard F, Uwe E. Reinhardt, Peter S. Hussey et al. 2003. It’s the Prices Stupid: Why the United States Is So Different from Other Countries. Health Affairs 22(3): 89-105. http://content.healthaffairs.org/cgi/reprint/22/3/89?maxtoshow=&hits=10&RESULTFORMAT=&fulltext=it%27s+the+prices+stupid&searchid=1&FIRSTINDEX=0&resourcetype=HWCIT.

Since 1997, The Health Foundation of Greater Cincinnati has invested over $111 million in projects that improve the health of the Cincinnati area. With major healthcare reform imminent, the Health Foundation aims to be a source for credible, timely information that can inform people in our region about the healthcare reform debate. While we do not support any specific plan or approach, we do support certain principles that we believe would improve access to healthcare and make our region healthier.

The Health Foundation supports a healthcare system that:

Please visit http://www.healthfoundation.org/reform for more information.