No matter where Americans stand on the health care debate, everyone can agrees on the obvious fact that costs have been rising at alarming rates for decades now. Health care now makes up 18 cents of every dollar spent in the U.S.; compare this to 1970, when it was 7 cents for every dollar.
This begs the question, where is all that money going? And where does all the money come from to pay for those health care bills? Planet Money offers answer to both of these questions in this data set.
First, this images shows where the money is being spent.
Despite tremendous changes in medical technology over the past 4 decades, the share of health dollars channeling into each major category has barely budged since the 1970s. In short, spending on major categories like drugs, hospitals and doctors has risen at about the same rate.
What HAS changed considerably is where that money comes from.
In 1970, greatest share of health care spending – by a long shot – was what individuals spent out of their own pockets. Today, insurance (both private plans and government-run programs including Medicare and Medicaid) covers just about everything.
The Planet Money team emailed Uwe Reinhardt, the Princeton health economist, to ask about this change.
Insurance coverage has become much more comprehensive, he explained.
For example, in 1970, most people were required to pay for drugs out of their own pockets. By 2000, it had become common for private insurance to cover drugs. Medicare drug coverage began in 2006.
In addition, employees have ceded a substantial part of freedom of choice in health care in exchange for less personal spending. Now, however, that trend is reversing.
“Now we are going the other way,” Reinhardt explained, “with higher deductibles and coinsurance for employer-based plans.”
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An extensive, long-term study conducted in the 1970s and 1980s is instructive here. Researchers randomly assigned individuals to different insurance plans — some with full coverage, and others having to pay for a large chunks of their medical care.
Those who had to pay more tended to seek less care. And those who were poor and had to pay more for care fared worse on some key health measures.
This leaves us with the underlying question, perhaps the most contentious problem in all of health economics: What costs should health insurance cover, and what costs should be left to individual patients?
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