Health spending at five times defense?
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.