Health care costs have been rising for several years. Expenditures in the United States on health care surpassed $2.2 trillion in 2007, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980. Stemming this growth has become a major policy priority, as the government, employers, and consumers increasingly struggle to keep up with health care costs. [1]
In 2007, U.S. health care spending was about $7,421 per resident and accounted for 16.2% of the nation’s Gross Domestic Product (GDP); this is among the highest of all industrialized countries. Total health care expenditures grew at an annual rate of 6.1 percent in 2007, a slower rate than recent years, yet still outpacing inflation and the growth in national income. Absent reform, there is general agreement that health costs are likely to continue to rise in the foreseeable future. Many analysts have cited controlling health care costs as a key tenet for broader economic stability and growth, and President Obama has made cost control a focus of health reform efforts under way.
Although Americans benefit from many of the investments in health care, the recent rapid cost growth, coupled with an overall economic slowdown and rising federal deficit, is placing great strains on the systems used to finance health care, including private employer-sponsored health insurance coverage and public insurance programs such as Medicare and Medicaid. Since 1999, employer-sponsored health coverage premiums have increased by 119 percent, placing increasing cost burdens on employers and workers. [2] With workers’ wages growing at a much slower pace than health care costs, many face difficulty in affording out-of-pocket spending.
Government programs, such as Medicare and Medicaid, account for a significant share of health care spending. Public health expenditures made up about 46% of the health care dollar in 2007, with the remainder split between private and out-of-pocket spending (42% and 12%, respectively). Medicare spending has grown at a slightly lower rate, on average, than private health insurance spending, at about 9.0 vs. 10.1% annually respectively between 1970 and 2003. [3] Medicaid expenditures, similarly, have grown at slower rate than private spending, though the current economic recession is likely to increase the number of enrollees in Medicaid and therefore increase Medicaid spending.
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