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COSTS: Health Spending to Double by 2016; Government Share to Reach 50 Percent

February 21st, 2007

Is the United States on its way to a de facto single-payer system? Over the next decade, U.S. health care spending is expected to double from today’s level, reaching $4.1 trillion, with the U.S. government share projected to reach 50 percent. Federal forecasters report in an article published online today in Health Affairs [2-week free access] that health spending will consume almost 20 cents of every dollar spent within a decade. Health spending in 2006 is projected at $2.1 trillion, which accounts for 16 percent of the gross domestic product.

In a front-page Wall Street Journal article, reporters Jane Zhang and Vanessa Fuhrmans write:

“The stark projections come amid increasing ferment over health care in the states and Washington. They could bolster the argument…that the U.S. is creeping toward a single-payer system in a disorganized, piecemeal way. Under such a system, the government essentially pays for health care and covers the cost by collecting taxes and premiums.”

Los Angeles Times reporter Ricardo Alonso-Zaldivar notes that the new report “deliberately steered clear of policy recommendations. But its authors warned of a growing possibility “that we will have to make important sacrifices to pay for healthcare” and a need for “constant assessment of the value we associate with our healthcare investment.””

Drug spending. One highlight of the projections from the Office of the Actuary at the Centers for Medicare and Medicaid Services is that the growth in national drug spending appears to be slowing as health plans under the new Medicare Part D program negotiate lower prices, even while providing more beneficiaries with access to medicines. Washington Post reporter Christopher Lee writes today:

“The findings provide new fuel for the debate about whether Medicare could get better drug prices if the government negotiated with pharmaceutical companies. Many Democrats in Congress say it would, and the House has already passed legislation requiring the government to use its negotiating muscle. President Bush maintains that the current system achieves the best prices, and he has threatened a veto.”

At a pre-embargo briefing yesterday, John Poisal, lead author from CMS, told reporters that a key factor in the overall health spending growth was that the “leading edge of the baby boom generation becomes eligible for Medicare” over the next decade, reports Susan Heavey of Reuters.

Consumer spending.  Consumers out-of-pocket spending on health care — expected to reach $250.6 billion in 2006 — is projected to climb to more than $440.8 billion by 2016, the CMS authors report in their Health Affairs paper. The authors write:

“Rising medical bills may prompt some employers to develop strategies to manage the costs associated with the provision of coverage as they attempt to strike a balance between attracting and retaining talented employees and minimizing labor costs. As a consequence, growth in out-of-pocket spending is expected to converge with growth in private health insurance spending over the coming decade.”

Update/Reactions: The Secretary of Health and Human Services, Mike Leavitt, told AP reporter Kevin Freking, “America’s per capita health spending is the highest in the world. There is simply no place on the economic leader board for a nation that spends a fifth of its domestic product on health care.”

In a radio broadcast this morning, “Marketplace Morning Report” invited reactions from Peter Lurie of Public Citizen and professor Glenn Melnick of the University of Southern California-Los Angeles.

Debate on the blogs. The new CMS spending projections are generating heated debate around the blogosphere. Over on The Daily Kos and Air America there are calls for a true single-payer system. Ragged Thots engages a debate on whether conservatives owe President Bush an apology on Medicare Part D, after seeing these new numbers.

More debate on health spending. Bloggers Ezra Klein and Merrill Goozner ask why U.S. health care costs so much in posts about last week’s McKinsey Group study, “Accounting for the Cost of Health Care in the United States.” Washington Post business columnist Steven Pearlstein also analyzed the report.

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1 Response to “COSTS: Health Spending to Double by 2016; Government Share to Reach 50 Percent”

  1. Johnathon Ross Says:

    A single payer or its near equivalent (Germany) is the only proven way to control health care spending even with this there will be struggles to continue to afford new technological breakthroughs. Multiple studies, ( GAO, CBO, California health options project and several other state based studies) all suggest that we would obtain about a 10% reduction in spending and cover everyone with better benefits with a single payer such as an improved Medicare for all. We would also have a real system for the first time and could begin to improve quality and reduce inappropriate care by using complete and public data about provider performance and resource use. Of course the insurance companies will lie until hell won’t hold it and punish any politician with courage to suggest single payer reform. They will spend millions of our premium dollars to prevent this from coming to pass. Is there a courageouus politician out there besides Dennis Kucinich? Is ther a courageous foundation out there willing to support efforts to bring about the best single payer system in the world? We are spending enough money to have just that and a lot more. jsr

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