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Blog

Good Neighbor Travel Insurance Blog

Health Care Costs By The Numbers

December 30, 2014 By : Doug Gulleson

  Good Neighbor Insurance provides both group and individual health care coverage in Arizona, as well as travel insurance for those vacationing overseas and for expats residing overseas.

We are happy to be able to share the following important information for our Arizona clients.

  • In 2010, the U.S. spent $2.6 trillion on health care, an average of $8,402 per person.
  • The share of economic activity (gross domestic product, or GDP) devoted to health care has increased from 7.2% in 1970 to 17.9% in 2009 and 2010.
  • Health care costs per capita have grown an average 2.4 percentage points faster than the GDP since 1970.
  • Since 2002, the rate of increase in national health care spending has fallen from 9.5% to 3.9%.
  • Half of health care spending is used to treat just 5% of the population.
  • Although only 10% of total health expenditures, spending on prescription drugs has received considerable attention because of its rapid growth (114% from 2000 to 2010).
  • In 2008, 27% of the non-elderly with 3+ chronic conditions spent more than 10% of their income on health, compared to 11% of the total non-elderly population.

Many policy experts believe new technologies and the spread of existing ones account for a large portion of medical spending and its growth.

Health care accounts for a remarkably large slice of the U.S. economic pie.  Each year health-related spending grows, virtually always outpacing spending on other goods and services, meaning that the size of that slice increases.

Concerns about rising health care costs and affordability of health care for families persist despite the enactment of comprehensive health reform legislation in March 2010 (the Affordable Care Act, or ACA).1  The ACA changed the health care landscape considerably by providing significant financial assistance to help people with low and moderate incomes afford coverage and associated cost sharing.

Together these provisions will dramatically reduce financial burdens for many people with lower income or significant health care needs.

Despite the many cost-reducing provisions in the ACA, system-wide health care costs are still projected to rise faster than national income for the foreseeable future, and this cost growth has important implications for government and family budgets. Reducing future federal budget deficits is a major focus in national policy debate, and spending on federal health programs is a primary target.  Federal health spending is projected to grow from 5.6% of Gross Domestic Product (GDP) in 2011 to about 9.4% of GDP by 2035.2  Proposals to reduce federal health spending range from modest reforms, such as modifying payment systems to better reward efficiency and effectiveness, to fundamental changes, such as transforming Medicaid into a block grant with capped federal spending and replacing the current Medicare entitlement with a defined set of services to a defined contribution toward purchase of a private or public health plan Recent proposals to reduce future budget deficits include various policies to slow federal health spending, including taking steps to constrain overall federal spending to a proscribed rate of growth, such as one percentage point above GDP or GDP per capita. The more far-reaching reforms would limit federal costs and potentially expose program beneficiaries to higher out-of-pocket costs and benefit reductions.  Many states have experienced severe budget problems during the recent recession, leading them to reduce state spending on Medicaid, which is one of the largest components of state budgets.

Health spending grows faster than national income in part because the health care system continues to innovate and provide new treatment options to people with serious acute and chronic illnesses.

Doug Gulleson

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