The Economic Impact of Healthcare: A Global and US Perspective

Introduction

The share of healthcare expenditure in the global and American economy is significant and often highlights the various dynamics influencing healthcare costs and resource allocation. As of 2021, healthcare spending in the United States made up around half of the average American household's annual expenditure on healthcare, reflecting a massive portion of the national budget.

The Proportional Spending on Healthcare

According to data from 2021, the average American household spent approximately $13,000 on healthcare, which represents nearly half of their total household spending of around $28,000. This figure stands in stark contrast to the rest of the world, with nations like the Netherlands, where per capita healthcare spending was just $7,100, showing a smaller proportion of total spending.

Healthcare Industry Impact

The healthcare industry in the US is a substantial contributor to the national economy.

Actual healthcare goods and services amounted to around $1.6 trillion. Another $3 trillion went into the system through government, business, and investment activities.

The scope of the healthcare sector, coupled with the regulatory environment, means that a significant part of healthcare workers' time is spent on administration and regulatory compliance rather than patient care.

Historical and Political Context

Concerning the historical and political context, the adoption of the Affordable Care Act (Obamacare) in 2009 profoundly impacted the way Americans view and discuss healthcare. Initially, the term 'healthcare' became conflated with both health insurance and the delivery of health services, leading to a fragmented and less coherent view of the healthcare sector's true economic impact.

Despite this complexity, the economic output and spending related to healthcare remain substantial. Some estimates suggest that healthcare could represent over 20% of GDP, a figure seemingly supported by Charles Schwab, who claimed that high wastage in the healthcare sector can actually indicate a stronger economy.

Future Projections

Looking ahead, national healthcare spending is projected to grow at an average annual rate of 5.4% from 2019-2028. By 2028, it is forecasted that healthcare will account for 19.7% of the US GDP, up from 17.7% in 2018. This growth is driven by rising costs for medical goods and services, as well as the projected growth in health sector wages.

Medicare, one of the major payers, is expected to experience the fastest growth in spending, at 7.6% annually between 2019-2028, largely due to increased enrollment. As a result, the insured population share is expected to decrease from 90.6% in 2018 to 89.4% by 2028.

Conclusion

The economic impact of healthcare is profound and continues to evolve with legislative changes and shifting demographic trends. Understanding the robustness and intricacies of healthcare spending is crucial for policymakers, economists, and the general public to make informed decisions about the future of the healthcare sector.