Surveying the Facts of the American Health Care Landscape

July 06, 2009 07:00 PM
by Jill Marcellus
With President Obama broadcasting his plea for health care reform on primetime television, lawmakers are scrambling to propose the perfect plan. But forget the blueprints on Capitol Hill and look at the actual lay of the land—what are the current realities of the American health care system?

U.S. Health Care Spending

In 2007, the U.S. spent $2.2 trillion on health care, or $7,421 per person. For the past 40 years, health care costs have risen at a drastically faster rate than inflation or wages.  Since 1999 alone, health care premiums have risen 119 percent, while wages have increased by just 34 percent. In 2007, 54 percent of health care costs were paid by private funds, and 46 percent were paid by government funds.

In 2009, health costs are expected to consume 17.6 percent of gross domestic product; this number is projected to rise to 20 percent by 2018, as total spending soars to a projected $4.3 trillion. By comparison, in 1970, health care spending accounted for just 7.2 percent of the gross domestic product, when the U.S. spent a mere $356 per person on health care.

Businesses are struggling to keep up with soaring health costs. “American businesses are losing their ability to compete in the global marketplace,” according to a government report, because of “crushing health care costs.” The report poignantly cites that in 2007, health care put General Motors “at a $5 billion disadvantage against Toyota.” GM recently declared bankruptcy.

According to the Kaiser Family Foundation (KFF), nearly 50 percent of the money spent on health care goes to treating just 5 percent of the population, with 21 percent going to treat just 1 percent. The 18-to-24 age group spends the least on health care, at $1,441 per person, while the 65 and over group spends $8,776 per year.

Americans spend far more, per person, on health care than any other developed country. According to the KFF, the U.S. spends 52 percent more on per-person health care than second-place Switzerland, and 90 percent more than many other industrialized countries.

Health Care Insurance

Forty-nine million Americans are currently uninsured, with an additional 25 million working-age adults underinsured, according to the Commonwealth Fund. Of those insured, 164 million people find insurance through their employers, 42 million are on Medicaid, 39 million are on Medicare and only 14 million purchase policies for themselves. 

According to a 2008 Census Bureau report, approximately 22 percent of the uninsured are noncitizens who live in the U.S. Of the remaining uninsured people, some choose not to purchase health insurance, while others are unable to afford it, whether due to poverty or pre-existing medical conditions that make it prohibitively expensive.

Inside the Demographics: Who Pays, Who Doesn’t, and What Is the Real Cost?

Owing to the rise in premiums compared to wages, even Americans with supposedly adequate insurance are struggling. For those 164 million Americans with employer-based insurance, out-of-pocket costs—premiums, copayments and the like—increased 34 percent between 2004 and 2007 alone, the Commonwealth Fund reports.

According to the U.S. government, employer-sponsored insurance for a family costs, on average, $12,680, amounting to “nearly the annual earnings of a full-time minimum wage job.” This statistic helps explain why over 80 percent of the uninsured come from working families.

As a result, the standards of living for insured and uninsured alike have suffered. In 2007, a Commonwealth Fund survey found that 41 percent of the working-age population reported difficulty paying medical bills and debt, up from 34 percent just two years earlier.

Of these Americans, 28 million exhausted their entire life savings on medical bills, while another 21 million sacrificed basic necessities like food and heat to meet their health payments. Harvard University researchers have determined that medical bills were at least partly responsible for 62 percent of bankruptcies in 2007.

Even as employer plans deteriorate, Americans confront greater obstacles to buying insurance outside of their jobs. The Los Angeles Times reports that in an effort to tackle rising expenses, insurance companies increasingly “cherry-pick” their customers, refuse coverage to people with pre-existing conditions, and revoke the insurance of high-cost patients.

Prognosis for the Future

Health care’s disproportionate claim on the economy affects U.S. spending across the board and America’s position in the international market. Many worry, writes, that the United States’ mounting debt, much of which can be traced directly to health care spending, will undermine America’s relationship with foreign investors—causing national finances and health care to further deteriorate.

The demographic future offers little consolation. Americans aged 65 and over far outstrip the national per-person average on health spending—a serious concern with the baby boomers reaching retirement and entering government-sponsored insurance programs. As a result of the aging population, Medicaid and Medicare, combined with interest paid on the public debt, will burn through all national revenue by 2035, according to Government Accountability Office estimates reported by

Moreover, the high number of uninsured young adults—13.2 million in 2007—raises concerns about the rise in preventable conditions. According to the president of the American Medical Association, “Every study that’s been done has shown that people who lack health insurance don’t go to the doctor for preventive care.”

Preventive care is a particularly acute problem in this recession, and 60 percent of doctors surveyed by the American Academy of Family Physicians reported “seeing more health problems as a result of skipped preventive care.” The 24 percent obesity rate among 18-to 29-year-olds, for example, foretells even greater medical costs in the future.

This is the current health care landscape in America. Next, some lessons from the past—specifically, from the failed health care reform effort led by Hillary Clinton in 1994—on how not to handle the problem.

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