2005 February 23 Wednesday
Medical Costs To Be 18.7% Of US Economy In 2014

Economists and actuaries at the Centers for Medicare and Medicaid Services and the National Health Statistics Group are projecting much higher spending for medical care in the US economy by 2014.

National health spending growth is anticipated to remain stable at just over 7.0 percent through 2006, the result of diverging public- and private-sector spending trends. The faster public-sector spending growth is exemplified by the introduction of the new Medicare drug benefit in 2006. While this benefit is anticipated to have only a minor impact on overall health spending, it will result in a significant shift in funding from private payers and Medicaid to Medicare. By 2014, total health spending is projected to constitute 18.7 percent of gross domestic product, from 15.3 percent in 2003.

Of course medical costs will continue to rise beyond 2014. But 2014 is not even 10 years away. Think ahead another 10 years . Young people are going to become wage slaves for the old.

The US government's portion of total medical costs in the USA will rise from 45.6% of 2004 to 49.4% in 2014.

By 2014, overall medical payments are projected at about $3.6 trillion -- with the government footing $1.8 trillion, or 49.4 percent, and private funding covering just over 50 percent, the report said.

Keep in mind that George W. Bush just proposed a 2.57 trillion dollar US federal budget for 2006.

Scared you do not have or may lose medical insurance? You should be. The cost of medical insurance is rising quite rapidly. In fact, health insurance premiums rose 11.2% in 2004. That is a scary increase. The per person costs for medical care will be very high in 2014.

The new report, published yesterday, says spending for health cost will reach a projected $11,045 per person annually by 2014, up from $6,423 now. Nationally, health expenditures were $1.8 trillion last year. By 2014, they are expected to be $3.6 trillion, meaning the government would be paying about $1.8 trillion for health care. President Bush's entire proposed federal budget for next year is $2.57 trillion.

Think about that $11,045 per person figure. The cost is obviously higher for old folks. But working people need to pay for the medical care of older people who are no longer working. So for a person who is working who has a family which includes members that do not work that person has to be earning a really high income to be breaking even in their net financial lifetime effect on society. This illustrates why illegal immigrants who have low educational achievements, low productivity, and hence earn low wages are no bargain. They will cost far more over their lifetimes than they will pay in taxes.

Is the rising cost of health care an argument for total federal take-over of health care?

"The whole idea of money moving from a private share to a public share is interesting," said Paul Fronstin, a senior research associate with the Employee Benefit Research Institute, a nonpartisan research group. "It seems to me it gives proponents of national health insurance ammunition to further make their argument that the government is already spending half; why not go the full amount and provide coverage for everybody?"

My guess is that the federal government will be in such a deep financial hole in 8 years that the idea of taking over paying for the health care of the entire population will be considered financially impossible. In 2014 the government will already be spending over 9.3% of the GDP on health care (the total will be 18.7% with the government paying 49.4% of that). It would need to grab over another 9% of the economy in taxes to be able to nationalise all of health care. But the tax increases needed just to support the existing expected increase in old age entitlements will make further tax increases for other non-old age entitlements impossible to enact.

Increased medical spending for old folks is coming at the expense of government funding of health care for old folks as Medicaid budgets for the poor are cut.

Health care costs for public programs are already straining many state budgets: Texas Gov. Rick Perry last week said his state and others may go bankrupt unless they get additional federal assistance for their Medicaid programs. Many states have already made cuts to Medicaid. And they may have to do more: President Bush's 2006 budget proposes shaving $40 billion from the federal share of Medicaid over 10 years by cracking down on state accounting methods.

Poor folks are politically less organized and less informed than old folks. The poor can not hope to compete for limited dollars in entitlements spending. Don't be poor in 2014. It will not be fun.

Financial disaster is approaching. What is the solution? A huge increase in medical research spending could produce far more effective and therefore much cheaper treatments for diseases. I believe that science holds the only hope for solutions that can have a big enough effect to prevent America from becoming a massive old age home with most of its people working as wage slaves to pay for medical care.

Update: Rising Medicaid costs are taking money away from education.

Medicaid spending has shot up 63 percent in the last five years, so that federal and state outlays together now total more than $300 billion a year. With no change in current law, the Congressional Budget Office says, the cost will grow an average of 7.7 percent a year in the next decade.

Governors desperately want to slow the growth of Medicaid, which they say is eating up state tax revenues they want to use for education.

Education is going to experience budget cuts in the coming decades as medical expenses eat up more of state and federal budgets. Think education spending is too low now? It will go lower per student. The money will be channeled to pay for health care of poor folks and old folks.

My modest proposal to reduce the cost of Medicaid: Deport all the illegal aliens. Illegals are driving up the number of medically uninsured. Being medically uninsured is much more common among immigrants. That means everyone else pays more taxes to pay for Medicaid for immigrants. The cost of a single year's tax paid health care for illegal aliens would pay for a barrier to keep out illegals on the full length of the US-Mexican border. Then we'd just have to authorize police to round up illegals and we'd remove millions of people from public subsidy.

Share |      By Randall Parker at 2005 February 23 11:43 PM  Economics Health

John S Bolton said at February 24, 2005 2:10 AM:

Why not tax medical benefits, as a charge on the assets of the elderly who receive them? Take the money out of their estates; to do otherwise is aggression on the net taxpayer. Public discourse in the welfare society scarcely allows us to speak of the evil which is done by this official aggression on the net taxpayer. We're not supposed to mention that he even exists, let alone has the right not to be made to keep the living dead going for another year or so, at the cost of hundreds of billions in looted money. It is vicious politicians who redistribute in this way. They are making societies into Goya monsters.

PacRim Jim said at February 24, 2005 9:52 AM:

Were a massive increase in medical research to develop treatments for various age-related diseases, it would only keep the elderly alive even longer so that they would develop other diseases. (I say that as one on the verge of geezerdom.)

Randall Parker said at February 24, 2005 10:23 AM:

PacRim Jim,

First of all, I believe aging will eventually be fully reversible and the steps we take to develop stem cell treatments and gene therapies to cure diseases are steps toward eventual total rejuvenation.

Second, I guess I failed to make one point: If we can delay the onset of a variety of diseases then we can delay the day when people are no longer able to work. There are people struck down in their 40s and 50s by Alzheimer's Disease, rheumatoid arthritis, osteoarthritis, spinal injuries, and other injuries and diseases. Take away those infirmities and those people will work longer, pay more in taxes, and receive less in government benefits.

Also, if we make disease treatment cheaper in the shorter term we will save money even if the result is that people live longer and get some other disorder. Saving in the shorter term is good because in the longer term cheaper treatments for the next round of diseases will be developed.

~ender said at March 1, 2006 5:14 PM:

Why not just quit giving medical care to illegals? If they come in for treatment/services, we ship them back. Their countries of origin are responsible for them. We should still do the immunizations and stuff for free, as that's in our best interest. And, in fact, we should bill those who didn't get their free shots and stuff when we're deporting them - hold them until they've paid for their stay, that's what the 14th Amendment is for...

James Klich said at February 3, 2009 8:50 PM:

We need fixed prices for Medical care. An X-ray should cost the same no matter where you go. Fixed prices in the long run will produce better care. This should also include dental care. We could cut costs by letting people see their Doctor over the computer and if they need medication it will be mailed to you. This would help the United States postal service.

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