The Effects of the Rising Cost of Healthcare on U.S. Expenditure
INTRODUCTION
The rate of growth in health care spending in the U.S. has outpaced the growth rate in the gross domestic product (GDP), inflation, and population for many years. Between 1940 and 1990, the annual rate of growth in real health spending per capita ranged from 3.6% in the 1960s to 6.5% in the 1990s. In addition, the share of GDP accounted for by health care spending rose from 4.5% in 1940 to 12.2% in 1990. In 2005 health care spending was nearly $2 trillion, or $6,697 per capita, which represents 16% of GDP (Catlin, 2007). The sustained increase in U.S. health spending over the previous four and half decades is likely to continue, and total spending on health is projected to reach $4 trillion, 20% of GDP, by 2015. These figures make the U.S. a clear leader in international comparisons of health care spending (Catlin, 2007). For example, per capita spending in the U.S. exceeds the level in the next 3 closest countries by more than 50%. Similarly, the share of GDP devoted to health care in the U.S. surpasses that in other developed nations by a wide margin. This sustained increase and high level of spending on health care in the United States has been the subject of discussion and scrutiny for several decades. Concern has intensified recently as both research studies suggest that continued rapid growth in spending may harm the U.S. economy (Downey, 2004). Health care spending affects the economy in diverse and complex ways, and effects may differ across sectors of the economy. For example, commentators have noted that although health care spending may hamper broad economic growth, it may also stimulate economic growth and prosperity in certain sectors of the economy (Downey, 2004). The dramatic increases in health care spending and the share of GDP devoted to health care have raised concerns about the negative impact of health care cost inflation on the U.S.
INTRODUCTION
economy. In an era of global economic markets, these
The rate of growth in health care spending in the U.S. has outpaced the growth rate in the gross domestic product (GDP), inflation, and population for many years. Between 1940 and 1990, the annual rate of growth in real health spending per capita ranged from 3.6% in the 1960s to 6.5% in the 1990s. In addition, the share of GDP accounted for by health care spending rose from 4.5% in 1940 to 12.2% in 1990. In 2005 health care spending was nearly $2 trillion, or $6,697 per capita, which represents 16% of GDP (Catlin, 2007). The sustained increase in U.S. health spending over the previous four and half decades is likely to continue, and total spending on health is projected to reach $4 trillion, 20% of GDP, by 2015. These figures make the U.S. a clear leader in international comparisons of health care spending (Catlin, 2007). For example, per capita spending in the U.S. exceeds the level in the next 3 closest countries by more than 50%. Similarly, the share of GDP devoted to health care in the U.S. surpasses that in other developed nations by a wide margin. This sustained increase and high level of spending on health care in the United States has been the subject of discussion and scrutiny for several decades. Concern has intensified recently as both research studies suggest that continued rapid growth in spending may harm the U.S. economy (Downey, 2004). Health care spending affects the economy in diverse and complex ways, and effects may differ across sectors of the economy. For example, commentators have noted that although health care spending may hamper broad economic growth, it may also stimulate economic growth and prosperity in certain sectors of the economy (Downey, 2004). The dramatic increases in health care spending and the share of GDP devoted to health care have raised concerns about the negative impact of health care cost inflation on the U.S.
INTRODUCTION
economy. In an era of global economic markets, these
References: Murphy, K.M. and R.H. Topel. The value of health and longevity. Journal of Political Economy, 114(5), 2006 Saminsky, R.J. Let’s not hide health costs. Newsweek, February 5, 2009 U.S. Chamber of Commerce. Employee Benefits Study 2006. U.S. Chamber of Commerce: Washington D.C., 2007 The Effects of the Rising Cost of Healthcare on U.S. Expenditure By Gwendolyn D. Smith Dr. Rajendra H.B. ADCP 460 CAPSTONE LeMoyn-Owen College