Big Numbers: Population Demographics, Cost of Care, and the Health Care Economy

Key Take Aways

It is critical to recognize the magnitude of the numbers involved in American health care and understand how that magnitude affects both the nation’s physical and financial health. To that end, we will be talking about five major research driven, data-based conclusions, including:

1. Health care cost numbers are really big, and represent a very large percentage of the US economy, household budgets and federal government expenditures.
2. Current growth projections indicate that without any changes, future health care spending will require a significantly larger, and arguably unmanageable, share of both individual household and government budgets.
3. The complexity of managing American health care is exacerbated by the large number of people affected and by the way in which they interact with the system as beneficiaries, tax payers and consumers.
4. The options being considered for changing the Affordable Care Act do not adequately address the needs, complexity of, or financial stability required by American health care.
5. The country cannot find the answers we seek and need, without considering the demographics driving both the usage and the cost of health care; the economic realities related to individual and institutional ability to pay; the economic implications of the policies currently already adopted; and a host of equity issues including the shifting of costs to future generations.

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American Health Care: Health Spending and the Federal Budget - From the Committee for a Responsible Federal Budget
The United States spends more on health care than any other country in the world, and a large share of that spending comes from the federal government.

In 2017, the United States spent about $3.5 trillion, or 18 percent of GDP, on health expenditures - more than twice the average among developed countries.

Of that $3.5 trillion, $1.5 trillion, is directly or indirectly financed by the federal government. In other words, the federal government dedicates resources of nearly 8 percent of the economy toward health care. By 2028, we estimate these costs will rise to $2.9 trillion, or 9.7 percent of the economy. Over time, these costs will continue to grow and consume an increasing share of federal resources.

Over the long term, the rising cost of federal health care spending is clearly unsustainable. Without a course correction, the result will be program insolvency, crowding out of important public priorities, and a growing federal debt.

Given how central health care spending is to the federal budget, it is important to understand how that spending is distributed and how it will grow. This paper will provide background on major health care programs in the federal budget. It is the first in a series called the American Health Care initiative, a joint collaboration of the Committee for a Responsible Federal Budget and the Concerned Actuaries Group.

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