America's Health Care Bill To Double In Next Ten Years

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Main Category: Medicare / Medicaid / SCHIP
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Article Date: 21 Feb 2007 - 4:00 PDT

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The cost of taking care of America's health is set to double over the next ten years to an annual bill of over 4 trillion dollars according to a new report by federal economics experts. This means that by the year 2016, nearly 20 cents of every dollar earned in the US economy will be spent on health care.

The report puts the current spending on America's health at 2.1 trillion dollars per year (based on 2006 estimates). This represents 16 cents in every dollar earned in the US economy.

The report is published today in a web exclusive online edition of Health Affairs.

The report shows that the rate of growth on health spending, as a proportion of the nation's wealth, is slowing down very slightly, from an estimated 6.9 in 2005 to 6.8 per cent of Gross Domestic Product (GDP) in 2006. This "flat" trend has been steady over the last four years. Before that it was showing a year on year growth.

However, the report's authors, comprising economists, actuaries and statisticians from the Centers for Medicare and Medicaid Services, the two government schemes that foot most of the US health care bill, say the trend is going to rise again to an estimated 19.6 per cent of GDP by the year 2016.

One of the authors, John Poisal, Deputy Director of Health Statistics for the Medicare and Medicaid Centers said that one of the main reasons for the growth is the changing age profile of the population, as the baby boom generation becomes eligible for Medicare, the government insurance scheme for the over 65s.

An area expected to show accelerated spending growth is prescription drugs, set to grow by an annual average of 8.6 per cent. This would bring the bill for prescription drugs to nearly 500 billion dollars in 2016 - more than double the 2006 amount.

The report's authors suggest a number of reasons for this upward trend in prescription drug spending. One is that new uses are being found for established, older medications, generic drug use has reached a plateau, while spending on new drugs is increasing. Particular diseases expected to attract increased spending will be diabetes, heart and cardiovascular, and the central nervous system.

Deputy Director Poisal said the nation will face some tough questions about how to pay for these health care costs, especially as the US is moving away from employer-based health insurance to government based schemes.

Government schemes such as Medicare is set to grow faster than private health insurance.

However, the burden of the nation's healthcare cost that is paid for directly by the individual is going to be slightly lighter.

The study's authors estimate that the current 26.4 per cent of the nation's healthcare cost that is paid for by the individual directly will come down to 25 per cent by 2016.

The burden of prescription drug costs is also changing. The report includes an assessment for 2006 of the impact of the Medicare Part D program that provides beneficiaries with assistance paying for prescription drugs.

According to Poisal, overall "Part D is doing what it's supposed to," which is to take on a bigger share of the prescription drug burden from other payers such as consumers, private insurers, and Medicaid, the government scheme for those on low incomes.

Out of pocket costs for people with private insurance are also set to rise. These cover things like visits to the doctor, cost of drugs and devices. Another area set to rise after a short flattening off period is spending on hospital and physician care.

The study also says that in spite of costs going up, consumers are still prepared to pay the high price for existing and new health care technology.

"Health Spending Projections Through 2016: Modest Changes Obscure Part D's Impact."
John A. Poisal, Christopher Truffer, Sheila Smith, Andrea Sisko, Cathy Cowan, Sean Keehan, Bridget Dickensheets.
Health Affairs, doi: 10.1377/hlthaff.26.2.w242
(Published online February 21, 2007)
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Written by: Catharine Paddock
Writer: Medical News Today
Copyright: Medical News Today
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