Topic: Health Care
Health Care to consume 20% of GDP by 2017 The HHS Centers for Medicare and Medicaid Services, (CMS), announced today that health care would be consuming 20% of our GDP by 2017by Chuck Angier
(Libertarian)
Tuesday, February 26, 2008
The HHS Centers for Medicare and Medicaid Services, (CMS), announced today that health care would be consuming 20% of our GDP by 2017. They made the same announcement last year about this timeslightly different numbers, same conclusion.
According to the Bureau of Economic Analysis, (BEA), health care in 2006 cost us $1.9 trillion or about $6,359 per capita. Health care has held a growing lead as our largest single expenditure since 1990 when it surpassed housing. It represents 20.6% of our personal expenditures, 38% more than housing and 87% more (almost double) what we spend on food! In 2006 it represented 14.4% of our GDP and according to the CMS, is projected to double to $4 trillion, 20% of our GDP in 2016, just 8 short years, outpacing inflation by a factor of about 2 as it has since the 1960's.
It is intriguing to compare the cost of health care to the cost of food. In the attached chart, has the top 7 (of about 11) major spending categories that the BEA has been tracking since 1929. All but 2 of the categories have remained basically unchanged for the duration. The exceptions are food, which has declined by half and health care which has quadrupled!
Prior to 1960 Food was our greatest expenditure consuming 20% or more of our spending! We were still an agrarian society, many grew their food, groceries consisted of staples, "eating out" was rare and processed foods were uncommon, yet food was consuming one-fifth of our spending!Health care costs were below 5% until 1952 and under 7% through 1961.
1960 Present Food costs have been cut in half to about 11%, yet food is abundant and inexpensive even though much of the food dollar now goes to convenience (little preparation), pleasure (eating-out), packaging and marketing. Health care has quadrupled to 20% of our spending. Quality care (if any at all) is scarce, expensive and at times results in financial ruin.
Why has one quadrupled while the other has been halved?
Both have been transformed by technology. I think of technology as a product or process that must make something better or less expensive. Technology has obviously worked its wonder on food, but what happened to health care? Many ills that would have resulted in death or infirmity can now be treated successfully with a fraction of the resources and minimal invasion, yet it has become scarce and expensive.
Some argue that we are living longer. This is certainly true, but we must ask, "At what cost and quality of life?" Some argue that we are healthier. Compared to what? If we were healthier, we wouldn't be having this debate.
Some argue that food is cheap because of subsidies. Subsidies are wrong, but a little research will reveal that subsidies that actually go to agribusiness for food production are insignificant. In fact, it is plausible to suggest that more subsidies are authorized to restrict production of food. The Conservation Reserve Program (CRP) and the ethanol subsidies are two that come to mind.
If subsidy were a valid argument for cheap food, then why the does the 46% "subsidy" that government provides for health care not result in cheap health care also? See chart below.
Health care data from BEA Public funding data from CMS Inflation data from Inflationdata.com
More later....
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2008 Chuck Angier, all rights reserved.
Published: Tuesday, February 26, 2008
Last modified: Friday, February 29, 2008
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Posted By: Ivan from Oregon
Date: 2008-02-26 12:47:34
I gave you a thumb, but will argue with your numbers. The first beef I have is your "inflation" corrected view. It apparently uses the govt. numbers which are ouright lies. Prices of things were pretty much stable until Roosevelt took us off the gold dollar in 1933. Up until then, a dollar in Jefferson's time was worth pretty much the same and inflation was essentially zero. Since then the dollar has deteriorated to a few cents, with prices doubling roughly every ten years. This would put average inflation rate at about 7% and would change your graph substantially. Even this kind of a chart would be misleading in terms of the current situation, as the current inflation appears to be at least 16% as measured by the increase of M3, just like the '70's.
If one wishes to come to some conclusions by looking at numbers, the numbers have to represent some reality. I won't argue the fact that as a percentage of expenditures, health care consumes more money than before. There are several reasons why this is so. One is that more end-of-life procedures are available to extend life for however long. It used to be that people just died. Another is that Govt took over a lot of what used to be private and everything the govt touches always costs more.
Another, and perhaps most important are the habits of the populace and the medical-industrial complex. As a case in point we have things like Aspartame, labeled "Nutra-Sweet". Another is the per capita consumption of sugar, up by 20x over the last century, producing "modern" diseases like diabetes. Another is hydrogenated oils - I could go on and on.
Now put all this into our medical system that has built entire industries based on "bypass surgery" and other such, not interested in curing disease, but ongoing alleviations of symptoms (think drug companies) and you get an altered picture.
Stay tuned to the food thing, though. Food is taking its share now - check real food prices over the last couple of years - you ain't seen nothing yet. Corn, soybeans, wheat, cocoa, etc.
Posted By: Christopher Espinal
Date: 2008-02-26 21:51:51
Actually, most professional economists would agree that inflation is overstated. This is because the cost of acquiring goods and services has gone down!
Disregarding technical issues related to inflation, the data provided seem to show a clear change in priorities and reflect a "maturation" of our economy to some degree. Your article is missing a conclusion (one of which I will try to provide).
Our nation is a much wealthier nation than in 1930. Food occupied a larger percentage of our expenditures because the GDP was relatively much less back then and people have to eat. The advent of the middle class provided a broad base of americans with newly disposable income. Health care has also been affected by government intervention - taking spending decisions out of individuals hands by means of "cadillac insurance policies" with relatively small co-pays. We have been encouraged to use as many health care resources as possible (why not, we aren't individually footing much of the bill). This in effect has changed a whole generation of both patients and physicians outlook on costs of medicine. The "standard of care" has become the newest and most expensive.
Even without governmental policy encouraging growth of the health care industy, I would argue that health care expenditures would still have risen relative to that of food. Wealthier individuals (which more of us are today than in the 30s), have more money to spend on luxury goods. I would argue that end-of-life care (which accounts for 50% of our health care costs - also likely to increase with the baby boomer generation aging) is a luxury service and accounts for a large portion of the trend you are seeing - although the pharmaceutical industy, advanced imaging techniques, and layers of HMO / PPO administrative costs have also affected this data.
Another point is that while american homes have increased drastically in size and cost, they appear to represent a similar % expenditure in your data, a clear sign of growth in GDP.
You mention a change in priorities reflecting a maturation in our economy. If that is the case then, how does one prioritize food? You either eat or die, leaving not much room for prioritization.
You mention higher disposable incomes to spend on luxury goods. This would support my position rather than oppose it as much more of our food dollar is spent on just that, convenience, pleasure, marketing and packaging...luxuries if you will...yet our food expenditures have been cut in half.
You argue that health care costs would have risen relative to food because wealthier individuals have more money to spend on luxuries. If those individuals had the freedom to make their own decisions and spent their own money, rather than having those decisions made by disinterested third parties then I would concur.
It appears to me that all the woes of our health care system, (which is now the most costly in the world), can be blamed on the removal of personal responsibility from the equation.
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2008 Chuck Angier, all rights reserved.