Per a new report, published by Medicare actuaries, United States health care spending has increased to $3.6 trillion. The report, published here, discusses a variety of factors for the cause of this increase.
In my view, this will be an increasing trend, for a variety of reasons, yet I will only address two. First of all, the baby boomers, which is approximately 28%-30% of the US population, are nearing or at retirement age. This means more individuals will be utilizing Medicare for various health care services. With this aging trend, it concomitantly will place upward pressure on pricing for health care services. The second reason: People are living longer. The life expectancy, in the US, has increased, which means individuals will utilize health care services for a longer period of time. This also will place more demand for health care, subsequently, prices will rise. These are two major factors, not including other economic factors.
Since prices are rising so rapidly, in the healthcare market, more use of private and public(Medicare, Medicaid, and the like) insurance will be likely. This will cause insurance premiums to rise, or Insurance firms will seek to transfer some of the risk back to the clients to control loss ratios and maintain healthy profit margins. When this happens, more utilization of credit, by individuals, will occur—this will be used to bridge the cash flow gap due to the fact many retirees are on a fixed income.
Here is the excerpt from the report:
“US health care spending increased 4.6 percent to reach $3.6 trillion in 2018, a faster growth rate than the rate of 4.2 percent in 2017 but the same rate as in 2016. The share of the economy devoted to health care spending declined to 17.7 percent in 2018, compared to 17.9 percent in 2017. The 0.4-percentage-point acceleration in overall growth in 2018 was driven by faster growth in both private health insurance and Medicare, which were influenced by the reinstatement of the health insurance tax. For personal health care spending (which accounted for 84 percent of national health care spending), growth in 2018 remained unchanged from 2017 at 4.1 percent. The total number of uninsured people increased by 1.0 million for the second year in a row, to reach 30.7 million in 2018.”