Friday, October 1, 2010

The Accelerating Cost of Healthcare Spending

Big V2.1 BlastoffAccording to a report by the Centers for Medicare and Medicaid Services (CMS), health care spending is going up.

In a recent article, Medpage Today and ABC News reported that healthcare spending will grow at an average annual rate of 6.3% over the next decade.

For example, over the ten-year period of 2009-2019, spending on private health insurance will grow from $810B to $1467B per year, an increase of 81% over the ten year period. Employer-sponsored private insurance spending will grow a little less, from $770B to $1240B, over the same time period. Public spending (including Medicare, Medicaid, and the new Children’s Health Insurance Plan) will increase from $1203B to $2339B. That 94% increase includes both expanded coverage, as well as decreased Medicare payments to physicians (a cut that many believe won’t hold).

By 2019, the study estimates that nearly 20% of the U.S. gross domestic product (GDP) will be spent on healthcare costs. That’s one in every five dollars.

Are you surprised?

I’m not. In fact, I think the estimates by CMS may be low. It’s not unusual for a family to spend 20% of their disposable income on healthcare insurance alone today. Take a family of four, with an annual income of $80,000. After taxes they might take home $64,000. A non-subsidized private insurance policy could easily run $1000 per month, or nearly 20% of their disposable income.

Did you ever expect that you’d spend more on healthcare insurance than food, or housing, or even (gulp) taxes?

Photo by Steve Jurvetson


Anon_e_mouse said...

Why do you think we don't have health insurance? With no income and our savings essentially exhausted after 19 months out of work, there's no money for it... and even when I was working (and paying for it 100% - no employer subsidy in my last position) the costs were absurd. And here in New Jersey that non-subsidized policy, for two people, cost just over $1200 per month in early 2009, plus deductibles and co-pays.

Colette said...

Anon e mouse, yes, the costs are ridiculous. Unfortunately, the new health care laws do nothing to bring down the cost -- and why so many people are without health insurance. I truly hope you find something soon.

Lynne Spreen said...

The only thing scarier than these numbers is being self-employed and timed-out of Cobra. Oh, and too young for that danged old evil socialized medicine that only the elders get. For the ultimate analysis on why health care costs so much, check out this article:

Colette said...

Lynne, I agree -- those who are in the "early retirement" phase have the biggest problem with health care costs.