U.S. health spending at a crossroads

Vascular surgeon Dr. Steve Henao of the New Mexico Heart Institute
American medicine is good at costly innovation, like transcarotid artery vascularization performed by Dr. Steve Henao at the New Mexico Heart Institute (source: dpa)
  • U.S. health-care spending as a percentage of GDP is almost double Europe’s
  • For that, Americans get cutting-edge technology but mediocre treatment on average
  • Higher health costs on their own do not affect U.S. economic growth
  • However, they create pressure for more public spending, which would hurt growth

Americans spend a lot of money on their health. To be precise, almost $10,000 per capita in 2015, more than double the $4,800 average in 2000. That brought total health expenditures in the United States to $3.2 trillion in 2015, or almost 18 percent of gross domestic product. The figure was 5 percent of GDP in 1960 and about 13 percent in 2000.

Most of this spending is privately funded, either from health insurance plans or by individuals who pay cash. Yet a big chunk of this money (about $500 billion) is paid by the federal government, which is responsible for six health programs, of which Medicare and Medicaid are the largest. Medicare covers roughly half of the medical expenses for Americans aged 65 or older (46 million people) as well as for select groups of young people (some 9 million individuals). Medicaid targets 75 million low-income Americans, covering almost all their health expenditure. Together, these two federal programs cater to about 40 percent of the U.S. population.

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