Putting Healthcare Costs in Perspective

The burden that our bloated and inefficient healthcare system puts on us has been a frequent topic here. Jamelle Bouie on The American Prospect found yet another way to point out how much it is hurting us. Medicaid is a program of last resort for the poor and the elderly. It is a shared program between the states and the federal government, with the states picking up about 43% of the cost on average. Medicaid costs have increased and tax revenue has decreased in the past few years putting a tremendous strain on state budgets. Bouie provides us with this chart to indicate how much of each state’s budget has to be directed towards Medicaid.

He points out that that the initial stimulus plan would have better served the states and the population by having the federal government pick up the entire cost of Medicaid for the duration of the fiscal crisis. The states are running low on funds and Medicaid is too big a target to ignore. The states are considering cutting people from the Medicaid rolls as a means of saving money.


Bouie’s note is a reminder that fixing the healthcare situation is the most important economic and social issue on our agenda. To put this issue more clearly in context, consider the amount of money that is being spent on healthcare in the U.S. This data is from the Centers for Medicare and Medicaid Services.

It is estimated that roughly 50% of all healthcare expenses are covered by government sources. This means excessive healthcare costs translate into excessive burdens on the taxpayer. This chart indicates how big a fraction of federal expenditures will have to be devoted to keeping this system afloat.

Just so your concern can be properly seasoned with a little outrage, here is a chart which shows how much of the GDP is spent on healthcare in other countries.

We spend about half again as much of our national commerce on healthcare as France and endure much worse healthcare outcomes. One way to look at this data is to conclude that at least a third of the $2.7 trillion we are projected to spend on healthcare in 2011 will be wasted money. There are a lot of things that could be accomplished with $900 billion.