The Challenges of
Health Care Cost Growth
Marilyn Moon
American Institutes for Research
February 4, 2008
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1
Growth in Medicare Spending and Private Health Insurance
Premiums per Enrollee for Comparable Benefits
14
12
Medicare
Percent
Percent
10
Private health insurance
8
6
4
2
0
1970–2004
1970–1993
1993–1997
Years
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1997–1999
1999–2004
2
Growth in Medicare Spending as a Share of GDP and in
Beneficiaries as a Share of Total Population
25%
Medicare as a share of GDP
21.9%
Prescription drug benefit as a share of GDP
20%
Medicare as share of the population
23.1%
18.2%
15%
Percent
14.8%
13.2%
13.8%
12.1%
10%
9.5%
5%
5.03%
6.12%
3.73%
2.77%
0.70%
1.32%
1.90%
2.29%
1970
1980
1990
2000
0%
0.73%
1.24%
1.74%
2.02%
2010
2020
2030
2040
Year
Source: 2005 OASDI and Medicare Trustees Report
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3
Projected 2025 Medicare Spending as a Share of GDP
8%
Part A
7%
Part D
6.5%
6%
5.6%
5.3%
2.9%
5%
Percent
Part B
1.2%
4.4%
4.0%
4%
2.8%
2.2%
3%
2%
2.0%
2.0%
3.6%
1%
2.5%
2.2%
2.0%
1998
1999
2000
2.4%
0%
1997
2006
Projection Year
Source: Medicare Trustees Report, 1997–2000, 2006
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4
Out-of Pocket Spending as a Share of
Income Among Elderly Beneficiaries
25%
22.6%
20%
19.1%
14.3%
Percent
15%
12.3%
11.0%
11.2%
1970
1978
10%
5%
0%
1965
1984
1987
2004
Source: American Institutes for Research calculations using NHE, CPI, CPS, and Trustees Report, MCBS
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5
Medicare Burden Lowers per Worker GDP Over Time
but Substantial Growth Would Remain
$140,000
Per worker GDP
$130,000
Per worker GDP minus Medicare
burden
$120,000
$110,000
$100,000
$90,000
$80,000
®
20
50
20
45
20
40
20
35
20
30
20
25
20
20
20
15
20
10
$70,000
C
ur
re
nt
2006 Dollars x
$150,000
6