Out Of Control Healthcare Costs – What It Means To You
This week the OECD released a report on “healthcare spending”. The OECD (Office for Economic Cooperation and Development) is a recognized global organization helping governments around the world tackle the economic, social and governance challenges of a globalized economy.
Following are 2 charts that I thought you might find interesting. One graph is from their report. The other is from the Economist.
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Here are some important points contained in these charts:
1. Without exception, healthcare costs are going up everywhere. Average spending by each country increased from 7.3% of GDP in the 90’s to 8.3% in the 2000’s. This was attributed to (1) technology changes, (2) population expectations, and (3) an aging population.
2. Total spending on healthcare is going up faster than economic growth in ALL OECD nations (31 countries worldwide inclusive of all the major countries around the world).
3. The speed at which it is going up has increased over the last two decades.
4. As you can see from most of the nations included in this chart, “public spending” on healthcare is a major part of all healthcare spending. That means that governments control much of the spending decisions. This can be problematic as governments around the world struggle to manage huge debt and economic decline. This is a big problem where “public health” is a right for citizens of a country.
5. It shows that healthcare costs continue to be a major (and increasing) cost to GDP of all countries. This means that healthcare has a major economic impact on societies around the world. The healthcare spending as a percentage of GDP has increased from 12% in the early 90’s to over 16% in 2008 (a new record for healthcare spending as a percentage of GDP).
6. Between 2000-2008 healthcare spending by individuals increased by 4.2% a year on average. That means that healthcare costs are increasing faster than inflation.
7. In the US, the average person spent $7,538 on healthcare in 2008. That is more than DOUBLE the $3,000 average of all OECD nations.
What Does All This Mean To You?
In my opinion, this is just more data to support that we have a global economic and social problem related to broken healthcare systems. While some are more broken than others, it doesn’t change the fact that governments around the world are going to make significant changes because the economics of healthcare will destroy the global economy. Much of this change is focused in 2 directions – better management of healthcare spending and movement toward prevention. While both of these areas will make a difference, it will not change the reality for all of us. Systems will change and we will suffer the impact of those changes. In the end, we will all pay more to fix this problem whether it is through paying more on healthcare spending, taxes, or fees.
This is an important time to take a more proactive posture in managing your healthcare spending and health decisions (eating better, exercising, etc.). Equally, this is more support that the Prevention and Wellness industry will continue to be in a long-term uptrend because they are a critical part of what is necessary to correct healthcare around the world. If you are looking for a good industry to be a part of in the future, Wellness and Prevention will continue to grow regardless of the economic trends.
7 Responses
GDP = total value of goods and services for any economy. It is the most popular way of measuring economic output for any economy. Below is a difference of the two with examples.
Gross domestic product (GDP) is defined as the “value of all final goods and services produced in a country in 1 year”.[4]
Gross National Product (GNP) is defined as the market value of all goods and services produced in one year by labour and property supplied by the residents of a country.[5]
As an example, the table below shows some GDP and GNP, and NNI data for the United States:[6]
National income and output (Billions of dollars) Period Ending 2003
Gross national product 11,063.3
Net U.S. income receipts from rest of the world 55.2
U.S. income receipts 329.1
U.S. income payments -273.9
Gross domestic product 11,008.1
Private consumption of fixed capital 1,135.9
Government consumption of fixed capital 218.1
Statistical discrepancy 25.6
National Income 9,679.7
For the US, are there any advantages (and/or disadvantages) of using one over the other (GDP vs GNP) to report trends in US health care expenditures. It seems rational that reporting health care spending as a percentage of GDP excludes things like purchase of prescription medications in Canada, for instance. Are indicators such as personal wealth reflected best by GDP or GNP, which may in turn reflect upon an individual’s access to health care because of income, employer-provided private insurance, etc? Or are the numbers so close as to be insignificant which one is used to report expenditures?
aspeer
Gordon – can you take a second to explain what the numbers in the white boxes at the far right of the second chart mean? Thanks for all the info you share with us!
I haven’t really thought through the GDP vs. GNP analysis to see if one is better than the other. I used GDP because that was what was used in the report. I suspect using either one you would come to a similar conclusion – healthcare costs are continuing to be a bigger and bigger costs for Governments around the world. At the core of the problem seems to be chronic disease and the costs associated with it. Of course there are other issues and challenges. If I recall, the World Health Organization (WHO) said that 87% of all healthcare costs were associated to chronic disease.
Those numbers represent the public healthcare percentage of the total healtcare costs (which would include public and private spending).
love your conclusion. As a personal fitness trainer, in the business for 32 years (just stopped training because my Juice Plus+ business gives me more time freedom) I’ve seen a huge increase in demand for wellness. I kept a waiting list of clients wanting to train. The only problem with Juice Plus+ is not having enough hours in the day to help all those looking for us. It’s an awesome business to be in.
These are pretty alarming statistics.
What is GDP? I recognize GNP as being gross national product, but I am not familiar with GDP.
Kathy