Health spend­ing at five times de­fense?

The Washington Times Weekly - - Editorials -

In 2005 and 2006, the United States spent 16 per­cent of its gross do­mes­tic prod­uct on health care. Nine years from now, ac­cord­ing to a re­cent pa­per in the jour­nal Health Af­fairs, na­tional health ex­pen­di­tures (NHE) will jump to 19.6 per­cent of GDP. For a sense of how stag­ger­ing this in­crease is, con­sider that it alone would rep­re­sent 90 per­cent of last year’s to­tal de­fense ex­pen­di­tures — 3.6 per­cent­age points of GDP ver­sus 4 per­cent. So, in nine years, we’ll be com­pound­ing cur­rent health spend­ing with the near equiv­a­lent of the en­tire U.S. mil­i­tary bud­get.

Health spend­ing has been soar­ing for decades now. NHE ac­counted for 7.2 per­cent of GDP in 1970 and 9.1 per­cent in 1980. By 1993, NHE’s share of GDP reached 13.7 per­cent, where it tem­po­rar­ily sta­bi­lized — such that seven years later, in 2000, the health-care spend­ing ra­tio had ad­vanced only one-tenth of a per­cent­age point to 13.8. Then it re­sumed its up­ward tra­jec­tory, reach­ing 15.8 per­cent by 2003. It has re­mained in that neigh­bor­hood for the past three years. Ex­perts project that it will soon be­gin ris­ing again.

By def­i­ni­tion, soar­ing health-care ex- pen­di­tures are ac­com­pa­nied by very high op­por­tu­nity costs. Money spent on health care is not avail­able for ed­u­ca­tion or re­tire­ment sav­ings or leisure. While ag­ing and wealth­ier so­ci­eties around the world un­der­stand­ably choose to spend a greater share of their re­sources on health than younger, poorer na­tions, the United States spends a much higher share of its econ- omy on health than com­pa­ra­ble in­dus­tri­al­ized na­tions. Ac­cord­ing to “U.S. Health Sys­tem Per­for­mance: A Na­tional Score­card,” which Health Af­fairs pub­lished last Septem­ber: “At 16 per­cent of GDP, U.S. health spend­ing is dou­ble the me­dian of in­dus­tri­al­ized coun­tries, and since 2000, [U.S. health spend­ing] has been grow­ing more rapidly than be­fore.”

Here’s a sam­ple of what this com­par­i­son looks like, ac­cord­ing to a Fe­bru­ary re­port by the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment (OECD). In 2003 or 2004, the latest years with com­pa­ra­ble data, the United King­dom spent 8.3 per­cent of its GDP on health; Canada spent 9.9 per­cent; Ger­many spent 10.9 per­cent; France spent 10.5 per­cent; Spain spent 8.1 per­cent; and Ja­pan spent 8 per­cent. The av­er­age for th­ese six coun­tries is 9.3 per­cent. The OECD study cal­cu­lated the 2004 U.S. share to be 15.3 per­cent.

One last item, for per­spec­tive. U.S. GDP in 2004 to­taled $11.7 tril­lion. Six per­cent of that is $702 bil­lion. In other words, if the United States had spent the same share of its GDP on health care in 2004 as the av­er­age share spent by Canada, Spain, the United King­dom, France, Ger­many and Ja­pan, we would have spent $702 bil­lion less. That would have funded 100 per­cent of the 2004 de­fense bud­get — with an­other quar­ter of a tril­lion dol­lars left over. With enough money at stake to fund the largest mil­i­tary in world his­tory, it re­mains an ut­ter mys­tery why the health-care cri­sis is not higher on the na­tional agenda.

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