Who Pays for Health Care?

An interesting piece at the Atlantic Wire shows the change in who pays for health care services (hospital care, physician and clinical services, prescription drugs, etc.) from 1960 to 2010. In 1960 a far higher percentage of the payments were out-of-pocket and a lower percentage came from private insurance, Medicare and Medicaid. In 2010 a much smaller percentage was paid out-of-pocket and, with the exception of dental services and "other medical products", the vast majority was paid by private insurance, Medicare and Medicaid. 

That's interesting in and of itself, but what's downright unbelievable is the change in the amount spent on health care each year that's shown in the article. In 1960 the total amount spent was $23.4 billion and in 2010 it was $2,186 billion or a 93.4-fold increase. Of course there are more people in America in 2010 so a good question would be, "What's the per-capita increase in health care spending?"

The answer is that in 1960 the per capita spending was $147 and in 2010 it was $8,402 – a 57-fold increase. To give you an idea of how big a jump that is you need only note that the buying power of $1 in 1960 was the same as $7.35 in 2010. In other words health care spending literally exploded; if it had been even roughly analogous to inflation the per capita spending would be more like $1,080 than $8,402.

Some thoughts to ponder as you digest this information:

  • Would spending be lower if end consumers had to pay more out of pocket?
  • Would pricing transparency be greater without insurers playing middle man?
  • How much of the cost is due to the inefficiencies of the health care system? 
  • How much less would the spending be if doctors didn't have to employ multiple people simply to handle billing insurers?
  • If you added in the cost of health insurance that doesn't get directly applied to paying for health care services – many years we pay more in premiums than get spent on health care services – what would the annual spending be? 
  • It's interesting to note that where the money was spent – the percentage spent on hospital care, physician and clinical service, prescription drugs – is almost exactly identical in 2010 to where it was in 1960. Doesn't that seem to indicate that the entire system is screwed up, not just hospitals or pharmaceuticals?

The health care industry is facing some signicant changes thanks to "Obamacare," but it remains to be seen whether or not those changes will rein in costs. It's hard to imagine the health care system getting any less efficient, but then again in 1960 it was hard to imagine a man walking on the moon within a decade. 

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