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Who Pays For Healthcare?

By: | Tags: , , , , , , , , , , , | Comments: 0 | December 2nd, 2015

As I reach another personal birthday, I look back at over half a century of personal experiences. Not so out of reach is my passion for healthcare, and that is prompting this discussion of what has happened to healthcare in the U.S. over that period. Recently the California Healthcare Foundation ( published an incredibly interesting dynamic and informative report on healthcare cost, and the changes in cost and payments from 1960 to 2013 with some projections in to our current year. Wow! I urge anyone interested this industry to check out the footnoted references below.

From the report directly-

“Over the past five decades, there have been major shifts in how we pay for hospital care, physician services, long term care, prescription drugs, and other services and products. Fifty years ago, Medicare and Medicaid did not yet exist, and about half of hospital care was not covered by insurance. In 1960, almost 100% of the spending on prescription drugs came out of the consumer’s pocket, but by 2013, out-of-pocket spending was down to 17%.

From 1960 to 2013, the cost of healthcare, in nominal terms, has increased 100 times. To put that in to some perspective, $1 USD in 1960 was worth $7.80 USD in 2013. That computes to an annual inflation rate of 3.95% over the 53 year span, or 681%. Healthcare costs has increased (not adjusted for population) at 2% higher than “real” inflation for that period. National health spending reached $2.9 trillion in 2013 and is projected to increase to $5.1 trillion by 2023 (between 2014 and 2023), and health spending is expected to grow at an average rate of 5.8% per year.

The problems is going to get worse until one of two things happened, we change the way we pay for healthcare, and we put consumers in control. Today there are 4 players in healthcare and of those 4, the consumer is not really represented. You have the Government, who pays for a progressively larger portion, with local, state and federal government paying for 43% of all healthcare. Then you have the Hospitals, doctors and insurance companies. Yes, I ignored pharmaceuticals, not because they don’t matter, they do; but because they are around 10% of total cost, and they will be the subject of my next blog.

Health spending on a per-capita basis were in 2013, for all ages, was $7,097 (USD), those from 65-84 spent $15,857, and the fast growing 85+ has been $34,783. Remember that the 77 million baby-boomer generation in 2013 were 48 to 67. Do the math? I think the numbers for 2023 may be more than $5 trillion.

In 1960 total U.S. healthcare expenditures were 5% of GDP and in 2013 it was noted above 17%. Those numbers don’t have to be adjusted for inflation or even population. Take a moment and see this graphic display of what we are referring to.

“This interactive graphic uses data from the U.S. Centers for Medicare and Medicaid Services (CMS) to show national spending trends from 1960 to 2013 for health care by payer. (Figures presented refer to personal health care, which, as defined by CMS, includes goods and services such as hospital care and eyeglasses, but excludes administration, public health activity, and investment.)”

– Noel J. Guillama, President

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