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Healthcare Costs

Quick Facts

  • Health care costs doubled from 1996 to 2006, and are projected to rise to 25% of GDP in 2025 and 49% in 2082.
  • The United States spent approximately $2.2 trillion on health care in 2007, or $7,421 per person.
  • The Congressional Budget Office (CBO) estimates that the bill cuts the deficit by $143 billion over the next 10 years and by $1.2 trillion in the following decade.
  • The Affordable Care Act provides tax credits to help make health insurance affordable for families with incomes of up to 400% of the poverty level.

 

Problem

U.S. spending on health care is very high and a source of great concern. Families, businesses, and state and federal budgets are straining under skyrocketing health care costs. Health care costs doubled from 1996 to 2006, and are projected to rise to 25% of GDP in 2025 and 49% in 2082. The United States spent approximately $2.2 trillion on health care in 2007, or $7,421 per person. This comes to 16.2% of GDP, nearly twice the average of other developed nations. Employer-sponsored health insurance premiums have more than doubled in the last 9 years, a rate 3 times faster than cumulative wage increases.

The average cost of an employer-based family insurance policy in 2008 was $12,680, which was nearly the annual earnings of a full-time minimum wage job. Half of all personal bankruptcies are at least partly the result of medical expenses. Without controlling health care costs, families will continue to be burdened with higher premiums, businesses will be forced to drop coverage or lay off workers, and our national and state budgets will be fiscally unsustainable.

Opportunity

The Affordable Care Act (ACA) reigns in health care costs and attempts to “bend the cost curve” over the long term. The Congressional Budget Office (CBO) estimates that the bill cuts the deficit by $143 billion over the next 10 years and by $1.2 trillion in the following decade. Cost containment provisions include: delivery system reforms that focus on paying for value and increasing efficiency, reducing waste, fraud and abuse, establishing an Independent Payment Advisory Board to make binding recommendations on cost savings, investing in prevention and wellness, focusing on comparative effectiveness research and promoting market competition to keep prices down for patients. The combination of these provisions allows for significant advancement – though much work needs to be done to ensure cost containment is realized.

The ACA also includes a major investment in the affordability of health insurance for low-income families: under the law, all individuals with family incomes below 133% of the poverty line (i.e., below about $30,000 for a family of four) are eligible for free public insurance, and there are tax credits to help make health insurance affordable for families with incomes of up to 400% of the poverty level. The CBO also estimates that, for families, premiums for comparable coverage will be lower under reform.

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