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Saturday, September 21, 2013

Health Care Spending Will Peak Around 2025 and Then Flatten Out

Recent comment to the cost of medical care in for injured workers appear to reflect that it is a "boomer generation" factor. The question is whether the workers' compensation system can wait until 2025 or will it be dead by then as a result of medical costs. Today's post was shared by Mother Jones and comes from

This is apropos of nothing. I happened to be fiddling around with CMS health care expenditures and decided to take a look at how spending has increased year-over-year as a share of GDP for the past four decades. (Example: If spending increases from a 16 percent share of GDP to a 16.4 percent share of GDP, that's a year-over-year 2.5 percent growth rate.)

The chart below is a rolling 5-year average to smooth out the noise. Roughly speaking, it shows a steady decrease in the growth rate. If things continue along these lines, health care spending will continue increasing until it reaches about 21-22 percent of GDP sometime in the mid-2020s. The aging of the baby boom generation might send that number a little higher, but not by a lot, I suspect.

The mechanism is simple: As spending goes up, our collective resistance to higher spending increases, and that's the ultimate brake on health care expenditures. I'm willing to bet that U.S. spending on health care will never top 25 percent of GDP. It might not even top 23 percent.

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