Health Care Costs

Written by Sarah Provost
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The cost of health care in America in 2002 was 1,553 billion dollars. That's more than six times the amount spent in 1980, and nearly double the cost of 1992. I don't know about you, but I have trouble thinking in terms of billions of dollars, so here's a statistic I can grasp: in 2002, the annual per capita expenditure on health care was $5,540, double what was spent in 1990.

Hospital care accounts for the highest proportion of health care spending, as you might expect. But between 1992 and 2002, that proportion actually declined, while the proportion spent on prescription drugs doubled. During that time period, the cost of prescription drugs due to price inflation rose, while actual drug usage declined. That means we are paying more for fewer doses. The cost of retail prescription drugs in the US in 2002 totaled 166.6 billion dollars!

What Are the Causes of High Prices for Health Care?

One of the primary causes of these increases is the aging of our population. As the baby boomers reach their fifties and beyond, the need for medical care increases exponentially. Ironically, better health care means we live longer, and therefore need more health care. Since the only alternative to aging is death, there isn't a lot we can do about this.

Another cause, related specifically to the increase in costs of prescription medications, is the increase in marketing expenditures by pharmaceutical companies as they come up with new drugs or tweak existing drugs to maintain their patents. Every year, from 1995 through 2003, the pharmaceutical industry was the most profitable business in the United States. And this is despite increasing their promotional spending from 9.2 billion dollars to 21.2 billion dollars!

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