Health care tab ready to explode
By Julie Appleby, USA TODAY

The nation’s tab for health care Ëœ already the highest per person in the industrialized world Ëœ could hit $3.6 trillion by 2014, or nearly 19% of the entire U.S. economy, up from 15.4% now, a sobering government projection says.
Growth in health care spending will outpace economic growth through the next decade, and the government will pick up an increasing share of the tab.

By 2014, the nation’s spending for health care will equal $11,045 for every man, woman and child, up from $6,423 each this year, says the report released Wednesday by the Centers for Medicare & Medicaid Services. Those numbers are not adjusted for inflation.

While the growth of health insurance premiums will continue to slow, the annual increases will still exceed growth in workers’ disposable income. More could become uninsured as a result.

And as spending rises, public health programs such as Medicare and Medicaid will pay an increasing proportion, hitting 49% of all spending by 2014, up from 45.6% in 2003: “That could have important implications for the budget as a whole,” says the government.

“We all know the current system is not sustainable: Health care cannot keep rising faster than gross domestic product,” says Eugene Steuerle, a senior fellow at the Urban Institute. But, he says, the United States has been unwilling to embrace ways to control rising spending: limits on care and prices set by insurers or the government.

Marilyn Moon, a health economist at the American Institutes for Research, says the United States has the money to spend on health care but often uses it on other things, such as tax cuts or expensive autos. “Our society is getting richer and richer, and we have to decide what we want to spend our resources on,” Moon says.

Health care costs for public programs are already straining many state budgets: Texas Gov. Rick Perry last week said his state and others may go bankrupt unless they get additional federal assistance for their Medicaid programs. Many states have already made cuts to Medicaid. And they may have to do more: President Bush’s 2006 budget proposes shaving $40 billion from the federal share of Medicaid over 10 years by cracking down on state accounting methods.

The pressure on public programs and the rise in health care’s share of the U.S. economy, “almost make tax increases inevitable,” says economist Paul Ginsburg of the Center for Studying Health System Change.

The report says the new Medicare drug benefit, set to begin in 2006, will only slightly increase overall drug spending in the USA. That’s because Medicare expects drug discounts in the program to almost fully offset an expected increase in the use of prescription drugs.

There is some good news for private insurers, individuals and state Medicaid programs: Their share of the nation’s drug costs will shrink as Medicare’s share grows. This year, Medicare will pay 2% of the nation’s $223.5 billion drug tab. In 2006, it will pay 28%.