As most people know, healthcare costs have been rising much faster than other areas of our economy for decades. The chart below demonstrates what will happen to federal spending levels if healthcare costs continue to rise too quickly. Despite what some are saying, it is clear that other areas of federal spending- including social security are just not a significant problem. The spending side of our long term budget problem is almost entirely about healthcare costs.
This article shows an interesting comparison with other countries. While healthcare costs have been rising as a share of the economy across all countries, starting somewhere around the late 1970’s, our costs have been rising much faster than other countries. And while portions of our system are better than most of the rest of the world, the entire system is not better than most developed countries. In other words, we get very poor value for our money.
This leads us to the conclusion that our healthcare costs can be prevented from rising as quickly without sacrificing quality. Just holding healthcare costs to the current percent of GDP would make the long term budget problem manageable.
And if our healthcare system also starts to look like other countries’ systems, we may even see our healthcare costs decline as a percent of GDP. Looking at a few other countries, you’ll notice that Japanese and German costs have risen the least since 1980 so they may provide the most interesting insights.
