At $282 Million an Hour, It Ain’t Cheap!

The US spent $2.472 trillion on healthcare in 2009..that works out to $282 million an hour, give or take some loose change.

According to this article in the Journal of Health Affairs, this means that the healthcare portion of the GDP rose to an all-time high 17.3%, more than double of that of most other countries.

No wonder President Obama is placing healthcare reforms as a top priority – at the rate its going, healthcare expenditure will soon burst at its seams. Even more alarming is the fact that, for the first time in the next few years, public spending for healthcare services (Medicare, Mediaid, Veteran hospitals, children insurance program) will outstrip the largely private-sector driven healthcare expenditure. Put in another way, by 2012, public (government) spending will account for more than half of the total healthcare spending in the US.

In the US by 2012, the dark blue and yellow portions of the pie will shrink to less than half

Why is this so?

The main reason appears to be that healthcare spending continued to rise despite the recession that resulted in reduced spending in other areas of the economy.. After all, people do continue to get sick, in good times or bad.

This healthcare spending continued to rise partly due to the aging population; but the real reason is due to increasing prices (3.2% a year) and increasing use  –utilisation  in tech-jargon – at 1.5% annually.

Quite naturally, President Obama is looking at cutting expenditure like reducing Medicare costs, but this has not gone down well with the Democrats, creating delays in approval at Congress. Already, the President has backed down quite a bit from his original proposals and the way ahead appears to be for the Democrats and the Republicans to work together for a common solution – which is easier said than done.

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