How America Skimps On Healthcare

Not long ago, I opened a new box of cereal and found a lot fewer flakes than usual. The plastic bag inside was barely three-quarters full.

In 1970, medical spending took up just 6.9% of the U.S. GDP. That number jumped to 8.9% in 1980, 12.1% in 1990, 13.3% in 2000 and 17.2% in 2010. That’s not what happened. Although the rate of healthcare inflation did, indeed, slow to match GDP growth, the cost decreases weren’t from higher-quality medical care, drug breakthroughs or a healthier citizenry. Instead, it was driven by skimping.In the 20th century, traditional health insurance included two out-of-pocket expenses.

And when it comes to Medicaid, the government-run health program for individuals living in poverty, doctors and hospitals are paid dramatically lower rates than with private insurance. These higher prices generate heftier out-of-pocket expenses for privately insured individuals and massive bills for the uninsured, forcing millions of Americans toInsurers act as the bridge between those who pay for healthcare and those who provide it . To sell coverage, they must design a plan that payers can afford and providers of care will accept.

This dynamic creates a vicious cycle: costs go down one year, but medical problems worsen the next year, requiring even more skimping the third year.Federal actuaries project that healthcare expenses will rise another $3 trillion over the next eight years, consuming nearly 20% of the U.S. GDP by 2031.

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