American healthcare crisis looming?

February 26, 2008 12:30:05 PM PST
America's health care spending is going through the roof, increasing at three times the rate of inflation. That's according to new federal government projections.

The Centers for Medicare and Medicaid Services says that in less than 10 years, one out of every $5 dollars will be spent for health care.

The report also says healthcare costs and healthcare spending will be doubling per capita from $7,000 dollars last year to $13,000 dollars per capita in 2017.

U.C. Berkeley health and economics professor Will Dow spoke with ABC7 News about this report.

"The good news is that's actually slightly lower than what was projected in the past. The bad news is that's still about 2 percent a year faster than economic growth," says Dow.

Dow says the report is right and that there may be a 6.7 percent annual increase in health spending. But the economy will expand at more than four percent, so it's really not such a huge discrepancy. He says health care will increase from 16 to 20 percent of GDP (Gross Domestic Product).

"This is not a problem to me. We're a country that's growing richer and richer, and as we grow richer, we can spend our increased dollars on consumer electronics or we can spend it on healthcare to improve the health of Americans. In countries throughout the world we're seeing the choices of people to spend more money on healthcare as we get richer," says Dow.

The report is also right when it says there's a Medicare crisis. Dow says it's structural, meaning major changes are needed. America must reduce payments to seniors, maybe just well-to-do seniors, or increase taxes. It's an issue he says will not be resolved in this election year.

"None of the major presidential candidates today are addressing this problem of long-term rate of growth of spending with plans that have any hope of really working," says Dow.

Dow agrees with the Health and Human Services Secretary Mike Leavitt, that Medicare as it stands is not sustainable. They say politics being what it is, perhaps this looming crisis will not be dealt with until it actually arrives.