Small Biz Health Care Daily: Health Care Spending

A new report from the Centers for Medicare and Medicaid Services reportedly shows, unsurprisingly, that health care spending grew as a share of the economy last year. After all, the historic decline in GDP would indicate that health care spending was likely to expand as a share of the economy.

But a more troubling change in how health care is funded also is indicated. The Los Angeles Times reported:

In a stark reminder of growing costs, the government has released a new estimate that healthcare spending grew to a record 17.3% of the U.S. economy last year, marking the largest one-year jump in its share of the economy since the government started keeping such records half a century ago.

The almost $2.5 trillion spent in 2009 was $134 billion more than the previous year, when healthcare consumed 16.2% of the gross domestic product, according to an annual report by independent actuaries at the federal Centers for Medicare and Medicaid Services, or CMS, scheduled for release Thursday.

The nonpartisan accounting agency also projected that as early as next year, the country could mark another milestone as government picks up more than half of the nation's total healthcare tab for the first time.

As government’s share of funding climbs, that means government’s control expands. It also means that costs will continue to accelerate – since government as a third-party payer possesses no incentives to control spending and utilization – and government rationing will expand as well. Rather than looking to expand government’s role in health care, it is critical that policy changes start rolling back government in health care.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council