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In February of 2008, the National Health
Statistics Group of the federal government’s Center for Medicare
and Medicaid Services released a report projecting that by 2017
health care spending will account for about 19.5% of the
economy, and noting that in 2007 it totaled about 16 %.
The conventional wisdom would seem to indicate
that major changes are the only solution to reigning in health
care costs. Understandable as this widespread view is, the
conventional wisdom is wrong. The problem with looking at the
resources we devote to health care in isolation is that it
misses the fact both that our economy is constantly growing and
that due to productivity increases we need to devote fewer
resources to other necessities like food (see charts).
Health Care Spending as a % of Personal
Consumption Expenditures
Data like that shown in this chart is what scares
most people about health care costs: they keep rising as a
percentage of the average American’s budget.
Food as a % of Personal Consumption Expenditures
What most of us don’t realize is that increasing
productivity in our economy means we need to spend a smaller
percentage on other necessities, freeing up resources that are
used for health care. For example, while the average American
certainly has a greater abundance of food now than in 1940,
largely because of agricultural productivity increases, the
percent of the average budget spent to get that food has
steadily declined.
Health and Food Combined
The chart shows that the decline in how much
Americans spend on food on average, alone, has more than covered
the increase in what we spend, on average, on health care. By
adding together the percentage of personal consumption
expenditures on food (blue bar) and that on health care (yellow
bar) we get the red bar – which has consistently hovered around
30% from 1940 until today.
**These charts are versions, derived from updated
data, based on Figure 4.3 in Sherry Glied, Chronic Condition:
Why Health Reform Fails (Cambridge MA & London: Harvard
Univ. Press, 1997), p.103.
Data Source: (CEA 1991, 2008.) Available at
http://origin.www.gpoaccess.gov/eop/tables08.html
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