Kaiser Report Outlines Impact of Growing Healthcare Costs

Healthcare-related spending continues to grow each year, making it a challenge for policymakers to find ways to ensure those costs are met, according to a new report from The Henry J. Kaiser Family Foundation. The report, titled Healthcare Costs, A Primer, outlined current healthcare costs, their impact on society, and options for the future.

It is estimated that in 2010, the United States spent $2.6 trillion on healthcare, for an average of $8402 per person. These figures are in sharp contrast to 1970 when healthcare spending was an estimated $75 billion or about $356 per person.

According to the Kaiser report, US healthcare spending in 2010 represented 17.9% of the total economic activity or gross domestic product (GDP), whereas in 1970 it only represented 7.2% of economic activity.

Healthcare spending is not only on the rise, but over the last 4 decades the average growth in health spending has exceeded the total growth of the economy by between 1.1 and 3.0 percentage points.

However, the rate of healthcare spending year over year has been on the decline since 2002. In that year, there was an increase of 9.5% in national healthcare spending compared with the year before, whereas in 2010, the annual spending increase was 3.9% over the year before, in part due to the economic recession.

Compared to other countries, the United States has significantly higher per capita total healthcare expenditures. Based on data from the Organisation for Economic Co-operation and Development, healthcare spending in the United States is 48% higher than the next highest spending country.

When this spending is assessed, the report stated that almost half of all healthcare spending in the United States was used to treat 5% of the population in 2009. People ≥65 years of age account for the highest per person healthcare spending and, in 2009, averaged $9744 per person.

In terms of distribution of expenditures, according to data from 2010, more than half of healthcare expenditures were for hospital care and physician services; prescription drugs accounted for 10% of the expense.

Examining who often finances the healthcare bill, the report’s authors revealed that the largest sponsor was private funds, which accounted for 55% of health expenditures in 2010, although they noted that the private funds share has been decreasing over time.

Rising healthcare costs have also impacted families and employers. According to the report, increases to health insurance premiums have been outpacing inflation and growth in employee earnings. In addition, employers have increased the percentage of their payroll expenses devoted to health insurance costs.

Families are also seeing significant increases in out-of-pocket costs for healthcare, moving from average out-of-pocket expenses of $459 in 1996 to $795 in 2009. One study found that in 2010, 1 in 5 Americans were members of a family facing problems paying medical bills.

The number of chronic conditions a patient has is one factor impacting out-of-pocket spending. In 2008, 27% of nonelderly Americans with ≥3 chronic conditions had out-of-pocket costs that were >10% of their income, whereas only 11% of the total nonelderly population exceeded 10% of their income on out-of-pocket costs.

The authors of the report also examined why the United States had healthcare costs that were growing faster than the economy and concluded that there were several factors that could be playing a role. Some experts believe that development of healthcare technology could be driving spending growth, while other factors may be an aging population, increases in the prevalence of chronic diseases such as diabetes, increased insurance coverage, and unnecessary or wasteful medical spending.

Addressing the growing healthcare costs without reducing access to necessary services will be a challenging and complicated proposition for policy makers in the years ahead, according to the authors. Improving efficiency and effectiveness will require investment in research, education, new information systems, and performance incentives.