HOUSE_OVERSIGHT_020833.jpg

Millions of Americans have come to rely on Medicare and Medicaid – and spending has skyrocketed, to 21% of USA Inc.’s total expenses (or $724B) in F2010, up from 5% forty years ago.

Together, Medicaid and Medicare – the programs providing health insurance to low-income households and the elderly, respectively – now account for 35% of total healthcare spending in the USA. Since their creation in 1965, both programs have expanded markedly. Medicaid now serves 16% of all Americans, compared with 2% at its inception; Medicare now serves 15% of the population, up from 10% in 1966. As more Americans receive benefits and as healthcare costs continue to outstrip GDP growth, total spending for the two entitlement programs is accelerating. Over the last decade alone, Medicaid spending has doubled in real terms, with total program costs running at $273 billion in F2010. Over the last 43 years, real Medicare spending per beneficiary has risen 25 times, driving program costs well (10x) above original projections. In fact, Medicare spending exceeded related revenues by $272 billion last year.

Amid the rancor about government’s role in healthcare spending, one fact is undeniable: government spending on healthcare now consumes 8.2% of GDP, compared with just 1.3% fifty years ago.

Total Government* Healthcare Spending Increases are Staggering –
Up 7x as % of GDP Over Five Decades vs. Education Spending Only Up 0.6x

USA Total Government Healthcare vs. Education Spending as % of GDP, 1960 – 2009

[Chart Graph Data]
Spending as % of GDP
1.2%
8.2%
Total Government (Federal + State + Local) Spending on Healthcare
Total Government (Federal + State + Local) Spending on Education
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008

Note: *Total government spending on healthcare includes Medicare, Medicaid and other programs such as federal employee and veteran health benefits; total government spending on education includes spending on pre-primary through tertiary education programs. Source: Dept. of Education, Dept. of Health & Human Services.

KPCB www.kpcb.com USA Inc. | Summary

The overall healthcare funding mix in the US is skewed toward private health insurance due to the predominance of employer-sponsored funding (which covers 157MM working Americans and their families, or 58% of the total population in 2008 vs. 64% in 1999). This mixed private-public funding scheme has resulted in implicit cross-subsidies, whereby healthcare providers push

KPCB
CB www.kpcb.com
USA Inc. x
HOUSE_OVERSIGHT_020833