Wednesday, May 14, 2008

Harrowing Healthcare Costs

The next time dinner conversation stalls, why not instigate some conversation about the cost of health care? To keep it constructive, I’ve provided below some rather harrowing statistics. Special acknowledgement to the the Kaiser Family Foundation (KFF):

In sickness and in health, costs keep rising. Your dinner companions probably know from personal experience that insured working Americans have to spend more of their income each year on health care to maintain coverage. Health insurance premiums have increased between eight and fourteen percent annually since 2000 while workers’ earnings typically increase only three to four percent per year. Consequently, one-fifth of working-age adults, both insured and uninsured, currently carry debt from medical fees.

In 2005, the U.S. spent $2 trillion on health care. That averages $6,697 per person. But the average is highly misleading: almost half of health care spending is used to treat just five percent of the population. Drilling down it gets even more brutal. In 2004 just under a quarter of health spending went to care for one percent of the population.

A few enormous bills
You have to wonder who the big spenders are, and what happened to make it such a dreadful year for them. Their average health expenses -- not including insurance premiums -- were above $39,688. To help interpret this, KFF says “Because the onset of disease is unpredictable and can require intensive technology and time to treat, the distribution of health spending is highly concentrated.”

But the numbers still don’t make sense. With costs in the US healthcare system so inconsistently and marginally regulated I think part of the problem is the effect of market forces. (See my April 29 post for an example of unregulated medicine run amok.)

Who writes those big checks?
KFF says private health insurance is the largest source of health spending, accounting for about 55 percent of the nation’s total health spending. Public programs, including Medicare, Medicaid and some others pay for about 45 percent. Although the boomers are hitting Medicare eligibility any day now, the trend lines show each payor’s share staying roughly in the same proportion over the next ten years. While the total skyrockets, of course.

As your dinner companions debate the health care reform platforms of presidential candidates, remember: access to care includes affordability by definition. Universal coverage – mandated or not – is only legitimate when Americans can afford it and every day, fewer can.

In part two I’ll introduce some statistics about what we Americans get for our healthcare dollar.

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