Chart of the week
Healthcare Expenditures are eating the world?
What does this chart show?
U.S. healthcare expenditures as a % of GDP were 5% in 1960, as of 2021 they were 18.3% of GDP, or $4.3 trillion.
Why does it matter?
Despite spending $12.9k per capita on healthcare expenditures, over 2x the average of comparable countries, we don’t achieve better health outcomes1. Even when removing the impact of COVID, our life expectancy is in decline, and 40% of children and adolescents are overweight or obese along with 60% of adults.
Incentives are misaligned. The players in the healthcare system make more money treating people that are continuously medicated and chronically ill, which leads to treating symptoms, not underlying conditions. This is reflected in the 97:3 ratio of healthcare spending on treatment versus preventative care. Also, public companies creating the food that hugely contributes to the problem are incented to continue. Put succinctly by Justin Mares, the ability for Coca-Cola to be cheaper than water in many parts of the U.S. is because Coke externalizes the negative health outcomes of that Coca-Cola onto the U.S. taxpayer via the healthcare system.
While the locusts of deflation have come for most areas of the U.S. economy, vested interests in the healthcare swamp make it more complex and opaque. Studies estimate that 30% of health care spending may be wasted. The most reasonable solutions to control spending, like pricing transparency, pay-for-performance initiatives, and reducing federal subsidies, are politically unpalatable.
The Bottom Line
Healthcare expenditures = Price charged for healthcare services * Amount of services used
Sadly, both inputs into the equation are projected to increase. Without widespread nutrition education and a meaningful overhaul of American dietary habits, the outlook is bleak.
Chart & Data Sources - USA Facts and the Peter G. Peterson Foundation
Peter G. Peterson Foundation
