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Health care will eat up ‘one in five dollars’ of US GDP by 2020, Medicare says

By Sahil Kapur
Thursday, February 4, 2010 9:28 EDT
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WASHINGTON — Health care legislation may be on the back burner, but a new report released today underscores its spiraling upward trend.

In 2009, health care spending consumed a record high 17.3 percent of the nation’s GDP, according to a study published in Health Affairs by the Centers for Medicare and Medicaid Services.

The figure is up from 2008, when health care costs constituted 16.2 percent of the gross domestic product. Health spending in 2009 totaled $2.5 trillion, a growth rate of 5.7 percent in a year when overall GDP contracted.

The trend has accelerated during the last decade as medical spending costs have surged.

The nonprofit, nonpartisan Kaiser Family Foundation revealed in a September 2009 study that health care costs roughly doubled for the average American worker over the last 10 years.

“Under current law, health care spending will on average grow faster than the overall economy and that the public share of health spending will continue to increase over the next decade,” said Christopher Truffer of CMS, according to The Hill.

Thursday’s CMS study found that government health care spending, via the entitlement programs Medicare and Medicaid, will by 2012 grow larger than private sector spending for the first time. Noted the Wall Street Journal:

By 2020, according to the new projections, about one in five dollars spent in the U.S. will go to health care, a proportion far beyond any other industrialized nation.

“It’s going to be a desperate issue five to 10 years out,” said Gail Wilensky, the former top Medicare official in the George H.W. Bush administration. She said the U.S. will have to decide soon between raising revenue to pay for Medicare or reducing benefits.

Public funds accounted for 47% of the $2.34 trillion of national health spending in 2008, the last year for which figures are available. The federal Centers for Medicare and Medicaid Services estimates in a paper to be published Thursday in the journal Health Affairs that the proportion will rise to 50.4% by 2011. Last year, the federal actuaries had predicted the 50% mark wouldn’t be reached until around 2016.

“The health system is hurting, and we are seeing that in these numbers,” said Karen Davis, president of the Commonwealth Fund and an expert on health care policy, according to the Los Angeles Times.

While the report did not examine what impact the legislation in Congress would have on health spending, the Congressional Budget Office estimated that both the House and Senate bills would cut costs and reduce the deficit in the long-run.

They would, however, increase the share of costs saddled by the federal government.

President Obama and Democratic leaders have presented the bill as critical to bending the cost curve, while Republicans have claimed it will lead to increased costs and grow the deficit.

 
 
 
 
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