U.S. Health Care Spending Will Soar to $2.5 Trillion in 2009; More Than a Band-Aid is Needed To Stop the Bleeding

New estimates indicate that health care spending in the United States will reach $2.5 trillion in 2009, costing each American about $8,000 and consuming 17.6 of the economy in the largest one-year increase in the costs in at least 49 years.

The costs of health care – fueled largely by increased spending in public health programs such as Medicaid – are climbing at a record-setting pace and predicted to keep going up through 2018, when it is predicted such spending will reach $4.4 trillion and account for just over 20 percent of the economy. At that rate, the average annual cost to each American for health care in 2018 will be just over $13,000.

The new estimates from the Centers for Medicare and Medicaid Services underscore the importance of overhauling the U.S. health care system, even as America grapples with a deepening financial recession, wars in Iraq and Afghanistan, and a host of other domestic and international issues.

Health Care Costs Balloon

Overall, the rate of increase for both public and private health care combined was estimated at 6.1 percent in 2008, no change from 2007. However, the same costs are projected to shrink slightly in 2009, down to 5.5 percent, because of the ongoing recession, researchers said.

But that downward trend is not expected to last long.

Ballooning growth in public health costs is expected to go from 4.2 percent of all health care spending in 2010 to 6.1 percent by 2018. Public expenses are forecast to account for more than half of all health spending by 2016 and top 51 percent by 2018.

Recession Driving Down Prescription Spending

According to the new estimates, spending on prescription drugs was down to 3.5 percent of all health care spending in 2008 after reaching 4.9 percent in 2007. Further drops in prescription-drug spending can be expected and attributed to patients having less money to fill prescriptions and being more willing to use cheaper generic drugs, according to the new study.

Will Obama’s Overhaul Be Enough?

President Barack Obama has talked about undertaking a massive overhaul of the U.S. health care system, but the new estimates of increasing, record-setting spending underscores both the urgency for action as well as the enormity of the task at hand. Turning the rising tide of health care spending will likely take years, if not decades, to accomplish regardless of the tactics and strategies used. The question is, have we as a nation dug too deep of a hole in terms of health care spending for any measure to pull us out?

Any reform of the health care system must address many facets – prescription drug costs, insurance reimbursement rates, and hospital expenses among them – and address well established lobbyists, public interest groups, and other competing interests. Change is long overdue, but is it also too little, too late?

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