Healthcare costs on the rise

Healthcare costs are on the rise and there isn't much the industry can do to stop it, according to a Forbes article. 

Whether it results from healthcare reform or from future growth in world demand for medical innovations, new information from the Congressional Budget Office indicates healthcare liabilities will be the main reason the federal deficit will rise faster than tax revenue, the article states. 

U.S. health spending reached an estimated $2.7 trillion dollars in 2010 and the health share of the gross domestic product is projected to increase from 17.6 percent in 2009 to 19.8 percent by 2020, according to a report from the Assistant Secretary for Planning and Evaluation and the U.S. Department of Health & Human Services.

Medical innovation is driving that spending, writes Tomas Philipson, Daniel Levin chair in public policy at the University of Chicago, in the Forbes article. Philipson cites research from Harvard economist Joe Newhouse, who documented that medical innovation helped drive the growth of a period when U.S. per-capita healthcare spending grew by about 800 percent.

However, past and current reforms do not tackle this source of spending growth, and may even have an adverse effect, Philipson writes. This means local reform efforts in the U.S. don't show a complete picture on how the Affordable Care Act will affect overall spending growth, he said. As a result, the ACA will most likely raise world returns to innovation and in turn push future public liabilities higher, Philipson writes, adding that national reforms may have less impact on the future world returns than commonly recognized.

In 2012, CBO data suggested federal spending on healthcare programs will reach 6.3 percent of gross domestic product by 2020, up from 4.7 percent this year, far higher than the 40-year average of 2.7 percent, FierceHealthcare previously reported.

It is unclear whether global returns that have previously driven spending growth will be affected by state or national reforms, but between the ACA and future growth in world demand, healthcare spending will grow rapidly, leaving a financial deficit for the nation, Philipson writes.

To learn more:
- read the Forbes article
- check out the HHS brief 
- here's the COB data (.pdf)