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U.S. Health Spending to 2030 and Beyond (Part 3)

By: | Tags: | Comments: 0 | September 20th, 2016

In Part 3 of today’s blog, we will continue to focus on bringing awareness to some of the main issues in healthcare. It is important for us to shed light on these topics as they could become a big problem in the future.

If we are right, then we have major problem in the U.S economy, and the issues are only going to get worse. One of the important issues to address is how much the demographics are changing everything. We propose that there needs to be tectonic shift in how we use technology, such as the magic like applications of data collection, data analytics, communications in a stovepipe industry, as well as the changes in payments to “enable the medical providers, and empower the patients(SM).”

The main source of this blog is the recent Annual Report form the Federal Reserve Bank of Atlanta (ATL FED). The 2015 Annual Report form ATL FED was titled “The Graying of the American Economy.” **The link to the online report and videos below are enclosed below. If you have read any of my previous blogs, you know that this has been a hot topic for me for quite some time now.

One of the key quotes that caught my attention was this:

“Between 2010 and 2030, the number of Americans over 65 will nearly double, from 40 million to 74 million. What will this mean for the U.S. economy? With this report, the Atlanta Fed hopes to draw increasing attention to the implications and challenges of this demographic shift.”

This report is full of amazing information, and to a wonk like me, it’s simply awesome. I was disappointed that I could not spend more than a few hours reading and processing. I will admit, I read the report very strongly however, the numbers sort of scared me.

If you will recall in Part 1 and Part 2 of last week’s blogs, I mentioned that U.S. National Healthcare Expenditures crossed yet another major milestone by topping $3.2 trillion (USD) this summer representing 18.2% of gross domestic product (GDP). Additionally, the current government actuaries predicted that it will increase to 20.1% of U.S. GDP in the next eight years (2025), and will hit $5.6 trillion (USD).

So how can it get worse?

See the chart below –

This chart above represents the number of Americans that are 65 and over, and key dates are over 140-year period. This chart came out of the actual ATL FED report. You can see what is clearly an inflection point, TODAY!

Let me show you how that graph correlates to other data in a different way.

Year        Total Over 65 %        GDP Healthcare

1980         25,549,42                   7.9%

1990         31,241,831                12.1%

2000         34,991,753                13.3%

2010         40,228,713                14.4%

2020         56,441,000                19.5% E

2025               ?                        20.1% E

2030         74,107,000                  ?

2040         82,334,000                  ?

2050         87,996,000                 37% E

2060         98,164,000                  ?

These numbers reflect why we tell young people to concentrate on anything in healthcare when they ask what career to choose for the future. The number of people over 65 come from the ATL FED, the number of GDP come from U.S. Government actuaries, and the big number in 2050 of 37.5% come from an aggregation of scholarly journals. I have to tell you that I am not surprised by the numbers.

Honestly, when you look at the graph above, I think the 2025 number is too low; since we are not actuaries, we will live with the number. However, what we do know is how we use up healthcare as we age. In South Florida, we know a little about carrying for the elderly and what it cost; therefore, to fill in the blanks on the GDP column, what if we discount 2050 and just follow the graph up? I would post 2025 at 23% of GDP, 2030 maybe at 26% of GDP, and let’s stop at 2040 at 30% of GPD. By that point, we think that we will have a totally “out of the box” crisis in our hands.

We have been warned by the demographics that this cannot be something that surprises us anymore. The demographics are really scary, as the ATL FED also notes in their report, this shift will not only cause issues in cost, but also the real contraction of the labor force. Is anyone having a flash-back to Japan for the last 20 years yet?

There just may be a Part 4 of this series…

For now, I will end this with the same solutions from Part 2.

What is the solution? We think we know what will certainly help.

1. Reducing the cost of care by using more technology to collect, analyze, and make actionable.

2. Engaging the consumer with their own wellness in part by using more health IT.

3. Promoting better care coordination between providers of care and their patients.

4. Advancing a more efficient and transparent system that reduces waste and administration.

5. Adopting a payment model to be more aligned with care, and less to do with visits.

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