Medical expenses are increasing year by year and their causes
In 2017, the cost of health care in the United States was $3.5 trillion. This makes healthcare one of the largest industries in the country. This is equivalent to 17.9% of GDP. In contrast, health care spent $27.2 billion in 1960, accounting for only 5% of GDP. In other words, the per capita medical cost in 2017 was $10,739, compared to $146 in 1960. Medical expenses are growing faster than average annual income. In 1960, health care spending accounted for 4% of income, compared to 6% in 2013.
What led to this growth?
There are two reasons for this massive growth: changes in government policies and lifestyles.
First, the United States relies on company-sponsored private health insurance. The government has set up programs such as medical insurance and Medicaid to help those without insurance. These plans have spurred demand for healthcare services. This gives suppliers the ability to raise prices. A Princeton University study found that Americans use the same amount of health care as residents in other countries. They just pay more for them. For example, hospital prices in the United States are 60% higher than in Europe. The government’s efforts to reform health care and cut costs have instead increased health care.
Second, chronic diseases such as diabetes and heart disease have increased. They are responsible for 85% of medical expenses. Almost half of Americans have at least one. They are expensive and difficult to treat. As a result, the highest prevalence of 5% of the population consumes 50% of the total medical cost. The healthiest 50% consume only 3% of the country's health care costs. Most of these patients are medical insurance patients. The American medical community has done a heroic job in saving lives. But this comes at a price. Last year, the patient’s medical insurance expenditure was six times the average. The cost of care for these patients is one quarter of the health insurance budget. In the last six months of their lives, these patients went to the doctor's office an average of 29 times. In the last month of their lives, half of them went to the emergency room. One third is in the intensive care unit. One in five received surgery.
Preventable chronic disease
The second reason for the rise in medical costs is the prevalence of preventable diseases. The four main causes of death are heart disease, cancer, chronic obstructive pulmonary disease and stroke. Chronic health conditions have caused most of them. If found in time, they can be prevented or treated at a lower cost. Risk factors for heart disease and stroke are malnutrition and obesity. Smoking is a risk factor for lung cancer (the most common type) and chronic obstructive pulmonary disease. Obesity is also a risk factor for other common cancers.
These diseases cost an additional $7,900 per person. This is five times higher than the medical expenses of healthy people. For example, the average cost of treating diabetes is $26,971 per household. These diseases are difficult to control because patients are tired of taking various drugs. Those who cut spending found themselves having heart attacks, strokes and other complications in the emergency room. (Source: "The Impact of Chronic Diseases on Health Care", for a healthier United States, 2014.)
Recent studies have found that even Alzheimer's disease can be prevented. The study, called Sprint Mind, found that high blood pressure worsens dementia caused by Alzheimer's disease.
How does ACA slow down the rise in medical expenses?
By 2009, rising medical expenses consumed the federal budget. Medical insurance and Medicaid costs $676 billion. This is 19% of the total budget of $3.5 trillion. The payroll tax covers only half of the medical insurance, and there is no medical subsidy. This so-called mandatory expenditure also includes pensions, benefits and debt interest for federal and veterans. It consumes 60% of the federal budget. Congress knows that steps must be taken to control these costs.
By 2020, the retired baby boomer will raise the cost of health insurance and Medicaid to 24% of the budget. As health care costs grow faster than economic growth, the burden of health insurance taxes and trust funds will become less and less. By 2030, the trust fund will go bankrupt and the tax will only pay 48% of the cost.
Federal medical expenses are part of the mandatory budget. This means they must get paid. As a result, they are consuming funds that could otherwise be used to freely budget projects, such as defense, education or reconstruction infrastructure.
The goal of Obama's health care reform is to reduce these costs. First, it requires insurance companies to provide preventive care for free. This method can treat chronic conditions before it is needed in an expensive hospital emergency room. It also reduces payments to health insurance premium insurance companies.
Since the signing of the Affordable Care Act in 2010, medical expenses have grown by 4.3% annually. It achieves the goal of reducing the growth rate of health care spending.