Only One Thing Certain about Healthcare Costs: They Grow Faster Than Everything Else

Here is a very interesting picture from the Atlantic website, charting the unpredictability of healthcare costs.

The picture was put into the article in large part to point out how hard it is to estimate how much healthcare costs will grow over time. And certainly, the up-and-down roller coaster like quality of this picture is strong evidence that anyone who thinks they know what healthcare will cost the future should now, is probably lying.

But something else is worth noticing from this picture: even though the rate of healthcare inflation rises and falls, the rate almost always comes out as being greater than the more general rate of inflation. Healthcare costs rise faster than other costs. That means, all else equal, healthcare will continue to take up a larger and larger portion of our financial resources. That is unsustainable.

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3 Responses to Only One Thing Certain about Healthcare Costs: They Grow Faster Than Everything Else

  1. Nancy Mattison says:

    Why is it unsustainable? I hear that often lately–and wonder why, if health is what people clearly value, spending should not continue to rise. Isn’t it part of the service economy, providing employment and contributing to the GNP? Does an actual economic upper limit exist and, if so, where is that exactly?

    Why assume that it always will rise? If personalized medicine eventually recognizes its promise, health care costs may not only cease to rise, but even decline.

  2. Kevin Denny says:

    The “all else equal” is critical : how much we spend is P*Q which you can measure directly . It’s not obvious that the share of health care in spending will rise inexorably.
    Also I don’t know how the price index is calculated but it should be hedonic: adjusted for quality. A $2000 computer now is a lot cheaper really than one at the same price 15 years ago because the quality is vastly better. Likewise one might guess there have been changes in the quality of medical goods and services.

  3. Dave Newman says:

    The relentless rise in the cost of health care is not sustainable because it crowds out everything else, and “everything else” includes help for the poor and defending our national security, as well as the security of others who depend on our nation. At the present rate, David Brooks of the New York Times, 1/9/13, estimates that Medicare spending alone will double over the next decade. “This,” says Mr. Brooks, “is the crucial element driving all federal spending and pushing federal debt to over 250% of GDP in 30 years.” A nation cannot spend more money than it generates. There’s a word for that kind of country: deadbeat. By comparison, we will make Greece look “responsible.” We can’t keep borrowing from the next generation by going further into debt and saying, “Hey, it’s just Americans borrowing from Americans.” No it’s not. It’s Americans being unwilling to put health care on a responsible course and handing the bill to our grandchildren. Let’s consider making some grown-up decisions and actually “sacrifice” something for the sake of our kids.

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