Health Care Spending on the US Economy

Health Care Spending on the US Economy
Written by: Katie S.

In the past few years, health care spending in the US has greatly increased. The factors that are causing this spending growth have been greatly examined and solutions are being created to reduce this growth. The spending growth in health care is because of health care utilization, advances in medical technology and price inflation. America’s level of spending on health care are by far the highest in the developed world, according to data from the Organization for Economic Co-Operation and Development.

Health care spending is mostly viewed as beneficial seeing that it creates increased wages for health care workers, health care jobs, and increases the demand for medical goods and services. In the chart below, each cost pressure in the US is fairly small and increases at a consistent rate, while healthcare costs more than double from the second greatest cost of litigation.

In 2017, the US spent $3.5 trillion on health care expenditures, which is more than twice the spending of other developed countries. Of that $3.5 trillion, $1.5 is directly from the federal government. By 2028, it is estimated that $2.9 trillion of the $3.5 trillion will be directly financed by the federal government, which dedicates resources of 9.7 percent of the economy to health care.

In 2013, national health expenditures rose to $3.4 trillion and $10,709 per person. Just ten years before then, in 2003, the total national spending on health was $1.7 trillion and $5,670 per person. On the overall economy, health care spending has grown 9.3 percent, while the overall economic growth is only 3.6 percent. This means that more resources are being put towards health care than all other goods. This affects both private and public sectors of the economy. Companies who have larger health care spending will cut out other expenses, reduce wages and reduce health insurance benefits.
In 1960, public funding made up 25 percent of healthcare spending and in 2002 it doubled to 46 percent. An important part in this increase is Medicare and Medicaid programs. In order for the government to put such great amounts of money into healthcare, it relies on increased taxes and borrowing money, which can reduce the money that households have for other activities. By borrowing money for healthcare costs, has the same impact on the availability of other resources.
In 2002, the average household spent $2,350 a year on health care. In 1999, the average household only spent $1,959 on health care a year. Though this is an increased expense, it may benefit households by providing improved access to healthcare and wage and employment growth in health care. On the other hand, as health care costs increase, fewer families will be able to afford medical bills and health care costs. In 2003, 20 million families could not pay their medical bills and found it very challenging with rising costs in health care. Income would also usually be used to buy goods or save and put to use for education and retirement, but it is going more towards health care services instead in most households. This can cause a conflict between putting money towards health care or simply paying for the necessities of living. Over 60% of US families have reported having problems paying for necessities like food, rent and clothes.

In 1970, major health programs only used 5 percent of the federal budget. That increased to 20 percent by 2000 and 28 percent by 2017. By 2028, one-third of the federal budget will most likely be going to healthcare and 40 percent by 2040. Overall, the costs going towards healthcare are crowding out all other costs and making the income of American citizens put towards almost entirely health care and so much so that other necessities and more important household costs are being pushed to the side.

In conclusion, health care spending has already consumed an immense part of the federal budget and that spending continues to grow. Today, health spending is out of control and is consuming the income of Americans and the budget of the government and needs to be better controlled in order to allow spending and more focus on other important areas of the US budget.

Works Cited 

“American Health Care: Health Spending and the Federal Budget.” Committee for a Responsible Federal Budget, 30 May 2018, www.crfb.org/papers/american-health-care-health-spending-and-federal-budget.

“Effects of Health Care Spending on the U.S. Economy.” ASPE, 21 Feb. 2017, aspe.hhs.gov/basic-report/effects-health-care-spending-us-economy.

Sherman, Erik. “U.S. Health Care Costs Skyrocketed to $3.65 Trillion in 2018.” Fortune, Fortune, 21 Feb. 2019, fortune.com/2019/02/21/us-health-care-costs-2/.