Government Health Care Spending Unsustainable


NCPA Study Shows Aging Population, Generous Benefits to Blame

DALLAS (June 28, 2006) – Government spending on health care in the U.S. is on a course to consume about a third of national income by mid-century – an amount that would absorb the entire federal government budget as well as all state and local government budgets, according to a study published by the National Center for Policy Analysis (NCPA). The projection, which is part of a ten-country study, is based on the spending patterns of the past thirty years. The study can be found online at -- http://www.ncpa.org/pub/st286/.

"No one in the Bush Administration or on Capitol Hill has been willing to acknowledge that government health care spending is driving the country to the point of bankruptcy," said NCPA Senior Fellow Laurence Kotlikoff, co-author of the study and professor of economics at Boston University . "There is a limit to how much government can extract from taxpayers to pay medical bills. When that limit is reached, governments go broke."

The study notes that while European critics of the U.S. health care system often focus on the defects of our private health care system, the most important difference between the U.S. and other developed counties is our failure to control government health care spending. While government spending on health care is rising faster than the economy in all developed countries, spending in the U.S. is rising comparatively faster. The reason: other countries have direct control of their healthcare spending and can ration care, whereas the U.S. government allows Medicare and Medicaid participants to "buy" health care from providers, with no effective limit, and send Uncle Sam the bill.

According to the study:

  • Japan's government and the U.S. government are now spending about the same percent of national income on health care.
  • However, if current trends continue, Japan will almost triple its government spending on health care (reaching 18% of GDP), while U.S. spending will grow almost five-fold (reaching 33%).

Over the next five decades, the proportion of the population that is elderly will nearly double in the countries studied. And because older people consume more health care than younger people, this demographic change will inevitably cause spending to rise. However, the more fundamental cause of rising spending has been the willingness of governments to spend more on health care for citizens at every age. Overall, this expansion of benefits accounts for 75 percent of health care spending growth over the past 30 years in the ten countries analyzed in the study.

"The government can't control the graying of America," noted Kotlikoff. "But it can control the amount and types of benefits it provides at taxpayers expense."