FACTS ON HEALTH CARE COSTS
Introduction
By several measures, health care spending continues to rise at the fastest rate in our
history.
In 2007, total national health expenditures were expected to rise 6.9 percent -- two
times the rate of inflation.1 Total spending was $2.3 TRILLION in 2007, or $7600 per
person1. Total health care spending represented 16 percent of the gross domestic
product (GDP).
U.S. health care spending is expected to increase at similar levels for the next decade
reaching $4.2 TRILLION in 2016, or 20 percent of GDP.1
In 2007, employer health insurance premiums increased by 6.1 percent – two times the
rate of inflation. The annual premium for an employer health plan covering a family of
four averaged nearly $12,100. The annual premium for single coverage averaged over
$4,400.2
Experts agree that our health care system is riddled with inefficiencies, excessive
administrative expenses, inflated prices, poor management, and inappropriate care,
waste and fraud. These problems significantly increase the cost of medical care and
health insurance for employers and workers and affect the security of families.
National Health Care Spending
● In 2007, health care spending in the United States reached $2.3 trillion, and was
projected to reach $3 trillion in 2011.1 Health care spending is projected to reach
$4.2 trillion by 2016.1
● Health care spending is 4.3 times the amount spent on national defense.3
● In 2005, the United States spent 16 percent of its gross domestic product (GDP)
on health care. It is projected that the percentage will reach 20 percent by 2016.1
● Although nearly 47 million Americans are uninsured, the United States spends
more on health care than other industrialized nations, and those countries
provide health insurance to all their citizens.3
● Health care spending accounted for 10.9 percent of the GDP in Switzerland, 10.7
percent in Germany, 9.7 percent in Canada and 9.5 percent in France, according
to the Organization for Economic Cooperation and Development.4
2
Employer and Employee Health Insurance Costs
● Premiums for employer-based health insurance rose by 6.1 percent in 2007.
Small employers saw their premiums, on average, increase 5.5 percent. Firms
with less than 24 workers, experienced an increase of 6.8 percent.2
● The annual premium that a health insurer charges an employer for a health plan
covering a family of four averaged $12,100 in 2007. Workers contributed nearly
$3,300, or 10 percent more than they did in 2006.2 The annual premiums for
family coverage significantly eclipsed the gross earnings for a full-time, minimum wage
worker ($10,712).
● Workers are now paying $1,400 more in premiums annually for family coverage
than they did in 2000.2
● Since 2000, employment-based health insurance premiums have increased 100
percent, compared to cumulative inflation of 24 percent and cumulative wage
growth of 21 percent during the same period.2
● Health insurance expenses are the fastest growing cost component for
employers. Unless something changes dramatically, health insurance costs will
overtake profits by 2008.5
● According to the Kaiser Family Foundation and the Health Research and
Educational Trust, premiums for employer-sponsored health insurance in the
United States have been rising four times faster on average than workers’
earnings since 2000.2
● The average employee contribution to company-provided health insurance has
increased more than 143 percent since 2000. Average out-of-pocket costs for
deductibles, co-payments for medications, and co-insurance for physician and
hospital visits rose 115 percent during the same period.6
● The percentage of Americans under age 65 whose family-level, out-of-pocket
spending for health care, including health insurance, that exceeds $2,000 a year,
rose from 37.3 percent in 1996 to 43.1 percent in 2003 – a 16 percent increase.7
The Impact of Rising Health Care Costs
● National surveys show that the primary reason people are uninsured is the high
cost of health insurance coverage.2
● Economists have found that rising health care costs correlate to drops in health
insurance coverage.8
3
● Nearly one-quarter (23 percent) of the uninsured reported changing their way of
life significantly in order to pay medical bills.9
● In a Wall Street Journal-NBC Survey almost 50 percent of the American public
say the cost of health care is their number one economic concern.10
● In a USA Today/ABC News survey, 80 percent of Americans said that they were
dissatisfied (60 percent were very dissatisfied) with high national health care
spending.11
● Rising health care costs is the top personal pocketbook concern for Democratic
voters (45%) and Republicans (35%), well ahead of higher taxes or retirement
security.12
● One in four Americans say their family has had a problem paying for medical
care during the past year, up 7 percentage points over the past nine years.
Nearly 30 percent say someone in their family has delayed medical care in the
past year, a new high based on recent polling. Most say the medical condition
was at least somewhat serious.
● A recent study by Harvard University researchers found that the average out-ofpocket
medical debt for those who filed for bankruptcy was $12,000. The study
noted that 68 percent of those who filed for bankruptcy had health insurance. In
addition, the study found that 50 percent of all bankruptcy filings were partly the
result of medical expenses.13 Every 30 seconds in the United States someone
files for bankruptcy in the aftermath of a serious health problem.
● One half of workers in the lowest-compensation jobs and one-half of workers in
mid range-compensation jobs either had problems with medical bills in a 12-
month period or were paying off accrued debt. One-quarter of workers in highercompensated
positions also reported problems with medical bills or were paying
off accrued debt.14
● If one member of a family is uninsured and has an accident, a hospital stay, or a
costly medical treatment, the resulting medical bills can affect the economic
stability of the whole family.15
● A new survey shows that more than 25 percent said that housing problems
resulted from medical debt, including the inability to make rent or mortgage
payments and the development of bad credit ratings.16
● A survey of Iowa consumers found that in order to cope with rising health
insurance costs, 86 percent said they had cut back on how much they could
save, and 44 percent said that they have cut back on food and heating
expenses.17
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● Retiring elderly couples will need $200,000 in savings just to pay for the most
basic medical coverage.18 Many experts believe that this figure is conservative
and that $300,000 may be a more realistic number.
● According to a recent report, the United States has $480 billion in excess
spending each year in comparison to Western European nations that have
universal health insurance coverage. The costs are mainly associated with
excess administrative costs and poorer quality of care.19
● The United States spends six times more per capita on the administration of the
health care system than its peer Western European nations.19
Time for Action on Reining in Health Care Costs
Policymakers and government officials agree that health care costs must be controlled.
But they disagree on the best ways to address rapidly escalating health spending and
health insurance premiums. Some favor price controls and imposing strict budgets on
health care spending. Others believe free market competition is the best way to solve
the problems. Public health advocates believe that if all Americans adopted healthy
lifestyles, health care costs would decrease as people required less medical care.
There appears to be no agreement on a single solution to health care’s high price tag.
Many approaches may be used to control costs. What we do know is if the rate of
escalation in health care spending and health insurance premiums continues at current
trends, the cost of inaction will severely affect employer’s bottom lines and consumer’s
pocketbooks.
Notes
1. Poisal, J.A., et al, Health Spending Projections Through 2016: Modest Changes Obscure Part D’s Impact. Health
Affairs (21 February 2007): W242-253.
2. The Henry J. Kaiser Family Foundation. Employee Health Benefits: 2007 Annual Survey. 11 September 2006.
http://www.kff.org/insurance/7672/index.cfm
3. California Health Care Foundation. Health Care Costs 101 -- 2005. 02 March 2005.
<http://www.chcf.org/>
4. Pear, R.. “U.S. Health Care Spending Reaches All-Time High: 15% of GDP.” The New York Times, 9 January
2004, 3.
5. McKinsey and Company. The McKinsey Quarterly Chart Focus Newsletter, “Will Health Benefit Costs Eclipse
Profits,” September, 2004.
6. Hewitt Associates LLC. Health Care Expectations: Future Strategy and Direction 2005. 17 November 2004.
7. Agency for Heathcare Research and Quality. Out-of-Pocket Expenditures on Health Care and Insurance
Premiums Among the Non-elderly Population, 2003, March 2006.
5
8. The Henry J. Kaiser Family Foundation. The Uninsured: A Primer, Key Facts About Americans without Health
Insurance. 2004. 10 November 2004 <http://www.kff.org/uninsured/>
9. Chernew, M. “Rising Health Care Costs and the Decline in Insurance Coverage,” Economic Research Initiative on
the Uninsured, ERIU Working Paper 8, September 2002.
10. Wall Street Journal-NBC Poll on America’s Economic Mood, Wall Street Journal, August 2, 2007
11. ABC News/Kaiser Family Foundation/USA Today, Health Care in America 2006 Survey, October 17, 2006.
http://www.kff.org/kaiserpolls/upload/7572.pdf
12. Lake Research Partners, Key Findings form Presidential Primary Polls, March 20, 2007
13. Himmelstein, D, E. Warren, D. Thorne, and S. Woolhander, “Illness and Injury as Contributors to Bankruptcy, “
Health Affairs Web Exclusive W5-63, 02 February , 2005.
14. The Commonwealth Fund. Wages, Health Benefits, and Workers’ Health. Issue Brief, October 2004.
15. Committee on the Consequences of Uninsurance. Health Insurance is a Family Matter. Washington, D.C.: The
National Academies Press, 2002.
16. The Access Project. Home Sick: How Medical Debt Undermines Housing Security. Boston, MA, November
2005.
17. Selzer and Company Inc. Department of Public Health 2005 Survey of Iowa Consumers, September 2005.
18. Fidelity Investments, Press Release, 06 March 2006.
19. McKinsey Global Institute. Accounting for the Cost in the United States. January 2007