U.S. Debt and Perceptions of Healthcare

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1 U.S. Debt and Perceptions of Healthcare Joseph Burrier, Theresa Sanker, Nick Zanko Department of Economics The University of Akron Fall 2013 The rising cost of healthcare and the United States federal debt together have changed the way Americans view the health care system. The United States tends to consume more health care on a per capita basis in comparison to the other developed countries of the world. In 2011 the United States GDP was trillion dollars and the cumulative population expenditures on healthcare equaled 17.85% of GDP (The World Bank). In 2010, the Obama administration passed The Patient Protection and Affordable Care Act, abbreviated ACA, in order to increase the quality and affordability of healthcare, lower the rate of uninsured Americans and slow the growth rate of health care costs. To put the amount of money that Americans spend on healthcare related costs into perspective, consider the following. In 2011, the United States spent 17.85% of its GDP on healthcare related costs, which is by far the highest among other highly developed countries. It is also important to keep in mind that an equal percentage of expenditures between countries is not equal in the total amount of dollars spent on healthcare. For example, in 2011 the United States spent roughly $2,675,947,050,000 on health care related costs 1, this breaks down to around $8,680 per person (Centers for Medicare and Medicaid Services). In the same year 1 Healthcare spending being calculated by multiplying column 3 by column 2.

2 Germany, with the next highest percentage of healthcare spending relative to GDP, spent roughly $398,252,166,667. Now just for comparison purposes, if we were to set Germanys GDP equal to that of the United States, ceteris paribus, then German healthcare expenditures would be much lower than that of the United States at roughly $1,658,037,780,000. Country GDP in 2011 % of GDP as Total Health Expenditures in 2011 China 7,321,935,025, % Japan 5,896,794,887, % Germany 3,600,833,333, % United Kingdom 2,444,883,870, % Italy 2,192,357,094, % Sweden 539,277,966, % Poland 515,666,869, % Greece 289,627,362, % United States 14,991,300,000, % This data from table 1 was used to generate the correlation data in table 2. It is evident there is a relationship between GDP and total health expenditures. There isn t a perfect relationship, taking into account the United States and other outlier countries. In order for there to be a perfect relationship, the black trend line would be upward sloping touching 4 (y axis) and the intersection of 16,000,000,000,000 (x axis) and 20 (y axis). Furthermore, the R Square data shown in the regression statistics explains approximately 77% of the variability in the data. The other 23% is in the unknown data for other countries, some of which have no documented data at all.

3 In the long run, the overall economic health of the country is the most important restraint on fiscal policy. From one year to the next, the percentage spent by the U.S. government on health care has been increasing. Some years see as little as.2% increase and others see.5% increase. However, since President Obama was elected, total health expenditure percentages have seen the largest increase in over 10 years. In 2011, expenditures jumped over 1% from Seemingly a small amount, the reality is that entitlement programs have been a leading outlay causing a significant debt increase. The Bureau of Public Debt from the Treasury Department showed the national debt stood at $ trillion dollars (Bureau of the Public Debt). Also, the national debt now exceeds 100% of the nation s yearly GDP, the total value of goods and services. The current federal budget projects that the national debt will continue to rise for good, showing $17.5 trillion at the end of fiscal 2013 and $20 trillion in 2016, the final year of President Obama s second term.

4 A big portion of the United States federal budget is being directed toward healthcare related costs. In 2010, the US government was responsible for 45% of all health care spending in the economy. This number is projected to increase to 49%, or $2.28 trillion, of total health spending by the US government in 2020 (Adamy, 2011). Surveys indicate that the United States citizens are no longer happy with the nation s health system. Starting in 2009 and continuing every year since, Economics students enrolled in The University of Akron s class of Computer Skills for Economic Analysis have developed a survey that is issued to both the students and the general public. This survey includes questions relating to demographics, beliefs (both economic and political), and public policy. Results from this survey can then be used to gather rational inferences about the general population s opinions. Americans, both insured and uninsured are unhappy with the direction the nation s current healthcare system is going. Specifically, table 2 run through SAS on the next page shows that 66% of those surveyed said that they were unhappy with the current system. Only 34% reported to be satisfied with the way the health system is currently. The same survey also looks into Americans opinion about current US debt and spending levels. When asked about current government spending, just over 77% of respondents believe that it is too high while only 9.6% said the government should be spending even more. When asked about the amount of debt the country has taken on, over 84% said that we have borrowed too much money.

5 TABLE 2 Do you have Health Insurance vs. Are You Happy With the Health System? Do you have health insurance? Are you happy with the nation s health system? Frequency Percent Row Pct. Col Pct. Yes No Total Yes No uncertain/don't know Total Frequency Missing =

6 Recent estimates on the effect of the Affordable Care Act show positive signs for the American people. Over the next 10 years, the federal government will save $190 Billion dollars on healthcare related costs. This estimated savings will increase the amount of deficit reduction of the ACA by 174% (Gruber, 2013). These savings are due to lower health insurance premiums driven by competition among insurers. The Affordable Care Act is one step in the right direction in aiming to improve Americans perception of the health care system and slowing the growing cost of medical care, but there are still many unaddressed flaws, redundancies and artificially inflated prices that will keep pushing the cost of health care higher and higher.

7 Works Cited Adamy, J. (2011, July 28). Retrieved October 31, 2013, from The Wall Street Journal: Bureau of the Public Debt. (n.d.). Retrieved October 31, 2013, from Tresury Direct: &endMonth=&endDay=&endYear= Centers for Medicare and Medicaid Services. (n.d.). Retrieved October 31, 2013, from Reports/NationalHealthExpendData/downloads/highlights.pdf Gruber, S. (2013, October 23). American Progress. Retrieved October 31, 2013, from The World Bank. (n.d.). Retrieved October 29, 2013, from r=country&pid=2