2006 January 09 Monday
US Medical Spending Reaches 16% Of GDP

Medical costs keep eating up an increasing portion of the US economy.

Rising health care costs, already threatening many basic industries, now consume 16 percent of the nation's economic output -- the highest proportion ever, the government said yesterday in its latest calculation.

...

The health care increase of 7.9 percent in 2004 was almost three times the overall national inflation rate, which was 2.7 percent. The average hourly wage for workers in private companies was essentially unchanged that year, according to the U.S. Department of Labor.

A prescription drug spending increase of 8.2% is seen as good news because it is the first non-double digit increase sinc 1994.

Spending on prescription drugs rose 8.2 percent, to $188.5 billion in 2004, the government said. This was the first year of single-digit growth in retail drug sales since 1994.

But spending on hospitals and doctors' services surged in 2004, and the nation spent far more on them than on prescription drugs.

The 8.6 percent increase in spending for hospital care and the 9 percent increase in payments to doctors were the highest recorded since 1991.

An aging population is contributing to this trend. So are technological innovations that produce new treatments for previously untreatable conditions.

Rising health care costs are eating in to part of raises in salaries.

Meanwhile, workers are expected to shoulder a 10 percent increase in annual health insurance premiums, according to Towers Perrin, a management consulting firm.

"In 2005, health insurance premiums rose by 9.2 percent, which was three times the increase in wages," says Larry Levitt, vice president for communications and online information at the Kaiser Family Foundation, which studies health care issues. "Certainly, there are no signs of that abating. It's very likely that in 2006, health care costs will continue to squeeze out wage increases."

Whether health care costs are rising faster than income increases depends on your age and income level. Self insurance costs rise more rapidly for the middle aged. Lower income people have to spend larger fractions of their income on medical insurance and bills.

The growing Hispanic portion of the US populace contributes to the rise in the uninsured and in taxes to take from the rich to give to the medically uninsured. A decline in the size of the smarter white upper middle class means fewer people will have to pay more money to support the rising fraction of the population that is poor and uninsured.

Of course America's useless corrupt and traitorous national elites are divided between, on one hand, Democrats who want to import more poor people to use them as reliable Democrat voters and, on the other hand, Republican business interests that want cheap labor now and to hell with the future. Top Congressmen are too busy going to vacation junkets paid by business interests to bother thinking about the consequences of their terrible misrule.

Share |      By Randall Parker at 2006 January 09 10:35 PM  Economics Health


Comments
John S Bolton said at January 10, 2006 1:49 AM:

How much is that per person, ~$6000 a year? If those over 65 get half that money, wouldn't that mean that bringing in one additional non-elderly person is tantamount to giving out a new health insurance policy that costs someone $3000 a year? The NYT reported today that the expected rate of diabetes for latinos is 50% over their lifetimes, several times that of the majority. For years, though, we've been told that immigrants are young and healthy and will take care of us; not we , them. Actually, the foreign born are older and sicker, and with incomes too low to be net taxpayers, on average.

Mark said at January 10, 2006 6:58 PM:

In the related headlines....


The Mexicans want to tell us what to do with our border.
Mexico, others press U.S. on immigration

And Attorney General Alberto Gonzales thinks we are being too mean to illegals.
Courts told to be nicer to immigrants

Invisible Scientist said at January 10, 2006 11:27 PM:

But the growing medical spending must also be calculated according to the fraction of the society where the medical care will be concentrated, and this figure must then be divided by the total wealth owned by the sub-group of the society. This way we would get better relative ratios.

For instance, the Baby Boom generation that is beginning to retire, is probably responsible for the expensive component of the medical care. Young people do not need expensive medical care in general, and MOST of the medical expenses are during the last few years of the individual's life, especially during the last few days of life. Some people even claimed that the medical industry is against terminating the life of a terminally ill and suffering patient, even if the patient does not want to live, so that they can make astronomical sums of money just from the last few days of the patient, and even though I do not have the figures to prove or disprove that claim, intuitively it seems that most of the medical expenses are during the end of the individual's life.

But the Baby Boom generation are precisely the ones who are rich, their net worth is rather high.( And this is at variance with many of the younger generation people who do not have the same chances for accumulating wealth unless they are much more talented and much better educated than the average members of the Baby Boom generation. )

Thus given that the Baby Boom generation is quite rich in comparison to the rest of the population, and given the probably the Baby Boom generation owns close to 80 % of the total wealth, these expenses can be paid by the patients. I cannot prove with absolute rigor but that the Baby Boom generation owns 80 % of the wealth, but I have extrapolated this figure from the fact that in March 2000, the top 10 % own 90 % of the wealth, and that mostly adults own the wealth, very few young people are millionaires before they are close to middle age.

What I am saying is that at this rate, the expensive medical care will only be available to the rich upper class, and there will be slightly inferior health care for poor people in the future.

Jorge D.C. said at January 11, 2006 12:38 AM:

...America's useless corrupt and traitorous national elites...cheap labor now and to hell with the future... consequences of their terrible misrule...

Wow. Somebody's really cranky today!

US Medical Spending Reaches 16% Of GDP

Medicare/medicaid systems are the ultimate financial black hole. And make no mistake there is no end in sight. There will never be enough funds to cover the wants and needs of the sick and the elderly. And that fact is understood by the administrators. So governments simply raise the taxes as high as the voters will tolerate and "make do".

Socialism is the great destroyer. Any society that busts the budget supporting the sick and elderly is decadent, not advanced. We are slouching toward matriarchy.

Hugh Angell said at January 11, 2006 6:39 PM:

While I concede medical costs are going up I have a real deep seated suspicion of 'national
economic data' ( see my thoughts on military expenditures for the Iraq campaign) and how
they are compiled.

Were we to use the 'military' formulation Randall prefers, medical costs would consume 100%
of GDP for, isn't that what all human activity is about? To preserve our own lives and that
of our progeny? Is that a 'wasteful' expenditure?

Is my buying a swimming pool membership a medical cost or not. Depends on how old you are I
suppose and what purpose you are buying in for. To oogle and meet girls or to swim laps to
make your cardiologist happy. How about vitamins, viagra and baldness 'cures'? Medical or
non medical. What about 'plastic surgery'. Medical, I suppose if you've been burned in a
fire, but is it medical when a 'pole dancer' wants bigger boobs or a 50 year old housewife
wants to look 45?

What about the 'benefits'. Surely the 'pole dancer' will earn more in tips if her "B" cups
are transmogrified into a pair of stupendous "D's". Might not the 50 year old who undergoes
a face lift earn more in pharmaceutical sales, if that her profession be, after she has had
her cosmetic surgery?

Then there is the problem of how do we 'minimize' health costs. As someone note the bulk of
our healthcare costs come at the end of our lives. Living to 95 doesn't mean 'we' will have
to spend any less ultimately on you and, probably a great deal more, than if you had done
the 'patriotic' thing and died when you when, statistically, you were supposed to have died.

To ask for 'patriotic volunteers' to die when, statistically, they were supposed to have
is a non starter as is 'drafting' people to meet their 'death' quota so how are we supposed
to meet the challenge of increasing 'medical costs'?

Automation? rationing, and if so, by what criterion? Money? age, social status, IQ? You are
stepping into untried territory here. While we might all agree spending fortunes on some
inner city hoodlum shot in the spine during a failed armed robbery attempt is an utter
waste of resources or that just because some Honduran Indian has arrived in Wisconsin the
citizens of that state owe his daughter an expensive operation is insane just try and
suggest that publicly or live with the consequences of your decision.

A teenage negro hoodlum doesn't look very menacing when he is in a wheelchair and even a
Honduran illegal immigrants daughter presents a compelling and sympathetic visage on your
TV. I don't really have a solution to this. I wish I did.


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