Total USA healthcare spending in FY 2010 was $2.5T. That was 17% of FY2010’s $14.7T GDP. Almost half the total (48%) was by government programs. Private insurance paid almost a third (32%). Employer-paid heathcare benefits are now 8% of average total employee compensation. The cost of those benefits grew at 6.9% CAGR from 1998 to 2008 while salaries grew 4.5%.
Our per capita spending is three times as high as the average for OECD countries. Private spending is a much larger share of our total.
Total USA healthcare spending is also a much higher percentage of GDP, twice the OECD average.
Our high spending does not result in better health, however. Our life expectancy is lower than the majority of OECD countries. Life expectancy for other OECD countries tends to increase with increased per capita spending.
Our infant mortality is close to the worst among all OECD countries. Number of hospital beds, physicians and doctor’s consultations per year per capita are all below the OECD average. We have the highest ranking only in high end technology, e.g., MRI machines.
USA healthcare spending is not only higher than our peers, it is rising faster.
A few additional facts about healthcare stand out. One is our obesity rate, the highest of all OECD countries and more than twice as high as the 15% OECD average (see table above). The percentage of our adult population considered obese rose from 13% in 1965 to 32% in 2005 and 34% in 2007. Obesity-related medical spending in the USA doubled to $147B or 7% of total healthcare costs between 1998 and 2008.
A second factor is greatly increased use of highly expensive new treatments. The USA Inc report views this as a “free good” hazard, meaning that because there is no cost for such procedures for Medicare patients they do not hesitate to demand them. A more subtle analysis would assess what alters the dynamic in OECD countries where substantially all healthcare is a “free good”.
The rate of use of procedures such as those above increases with age. An aging population increases per capita heathcare spending. Average spending per age group in 2004 in the USA was $2,650 for the 0-18 age group (25% of the population), $4,511 for the 19-64 group (63% of the population) and $14,794 for 65 and over (12% of the population). Absent any other changes, increased availability of high-end technologies will accelerate the rise in spending by an aging population.
The % of our population over 65 is growing fast, from 5% in 1930 to 10% in 1970 and 13% in 2010. It will soon jump significantly as the “baby boomers” reach 65. The only short-term way to reverse this trend is to increase immigration of younger workers.
Lifetime healthcare costs for the average American are $631K. That spending is disproportionately skewed to the end of lifetime. 28% of an average Medicare recipient’s spending occurs in the final year of life and 12% in the final two months. An obvious question (to which I do not know the answer) is how that compares to other OECD countries.
My aim in this and other introductory posts is only to get the facts about our economy straight. We spend twice as much on healthcare as our peers/competitors yet they get better results. In future posts I will encourage debate so we can understand why that is so and some potential solutions. The next post will focus on defense. Then I will analyze revenue.