Physician Staffing Blog

Healthcare News and Trends

The Road to $5.7 Trillion

February 05, 2019

The Road to $5.7 Trillion

By Phillip Miller


National health expenditures rose 3.9 percent from 2016 to 2017, reaching a total of $3.5 trillion and accounting for 17.9 percent of Gross Domestic Product (GDP), according to the Centers for Medicare & Medicaid Services (CMS). That works out to $10,739 spent on healthcare per person per year.


CMS projects that healthcare spending will grow at an annual clip of 5.5 percent from 2017 to 2026, when it will reach $5.7 trillion, or 19.7 percent of GDP. 


The good news is that this rate of growth is slower than the rate of growth from 1990 – 2007, which was 7.3 percent. The bad news is that healthcare will account for an even bigger part of federal, state, employer and personal budgets, crowding out other things that governments, businesses and people have to pay for.


There is a broad, national movement afoot to address rising healthcare spending that incorporates innovations such as population health management, system integration, quality-based payments, electronic health records, telemedicine, higher deductibles, home-health technology and price transparency. These efforts have at least modified the rate of healthcare spending growth, though they have not reduced spending overall.


The fact is we are on the road to almost $6 trillion in healthcare spending with little prospect of getting off. Demographics are a key part of the explanation. Growth in Medicare and Medicaid spending will significantly exceed that of other payers, as an increasing number of older people enroll in these federal and state-funded insurance programs. Per person healthcare spending for the 65 and older population is five times higher than per person spending per child and three times higher than spending per working- age person, according to CMS. Though people 65 and older represent 14 percent of the population, they account for 34 percent of healthcare spending. By contrast, children account for approximately 25 percent of the population but less than 12 percent of healthcare spending.


Social determinants of health, including poverty, which is more pervasive in the U.S. than in other First World nations, also will drive healthcare spending, as will the increasing cost of ever more sophisticated medical procedures, treatments, and drugs.  


Healthcare is and will continue to be expensive, but it is important to consider that spending on health has many benefits, including enhanced lifespans and improved quality of life for millions. In addition, healthcare now employs more people than any other sector of the economy, having recently surpassed retail as America’s number one employer. It is a key economic driver and offers rewarding careers for many different types of caregivers.  


What can be done to reduce the cost of healthcare while maintaining access and quality should be done. But it also should be considered that healthcare is something that is worth paying for. I welcome you to share your views on this topic.



Phillip Miller is Vice President of Communications for Merritt Hawkins and Staff Care, companies of AMN Healthcare, and can be reached at phil.miller@amnhealthcare.com.

 


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