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Kaiser Foundation Report on Health Spending History

By November 1, 2012Commentary

Our last report on health spending in America is likely the best, coming from the usually reliable source of the Kaiser Family Foundation.  (KFF Report)  The report is intended to be a primer on issues surrounding health spending, from the basics of how much the country has spent on health care over time–in general and on a per capita basis, how that spending compares with other countries, what services are being purchased and who are the payers, why health care costs have grown faster than the economy, how those rapidly growing costs affect families and employers and, perhaps most importantly, what can be done to effectively check the continuing rise of health spending.  The basic parameters of our situation are fairly well known:  in the forty years from 1970 to 2010 health spending increased as a percent of GDP from 7.2% to 17.9% and per capita spending has grown an average annual 2.4% faster than GDP, although the rate of growth has fallen recently from 9.5% to 3.9%, largely due to general economic factors.

We spend about half of this amount to treat just 5% of the population and a large percent of the population incurs basically no health costs.  In fact, in 2009 almost 22% of total spending went to care for just 1% of the population, whose services cost about $52,000 in that year, on average.  The bottom 50% of the population accounted for less than 3% of the total.  The result is an enormous transfer of wealth from the majority of our citizens to a few with very high expenses, often due to diseases which are the result of poor lifestyle choices.  As other research has shown, payment increasingly comes from governments, particularly the federal government, and increasingly goes to hospitals for both inpatient and outpatient treatments.  Rising spending has caused health care to become a larger part of household budgets and increasing out-of-pocket expenses may lead to poor decisions about skipping appropriate care, as well as avoiding unnecessary services.  In terms of what can be done, as with the other reports we reviewed this week, this one tends to ignore the obvious need to address that 1% to 5% of the population who have very high expenses, often due to their own behavior.  Uncoupling people from the financial consequences of their behavior is never a good idea and it is a primary source of our health spending dilemma.

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