Black Jet Theory – Volume 2020-19 – National Health Expenditures – How Much Air Can the Healthcare Balloon Hold?
September 11, 2020 by Marshall Snipes
In December of 2019, the Centers for Medicare & Medicaid Services (CMS) announced the National Health Expenditures for 2018. “Total national healthcare spending in 2018 grew 4.6%, which was slower than the 5.4% overall economic growth as measured by the Gross Domestic Product (GDP) … The growth in total national healthcare expenditures … reached $3.6 trillion in 2018, or $11,272 per person.”[1] National healthcare expenditures represented 17.7% of GDP in 2018. These statistics beg the questions, where did the money come from and where did it go?
Where it Came From.[2]
Health Insurance 75%
Out of Pocket 10%
Other 3rd Party Payors 8%
Investment 5%
Public Health 3%
Total 100%
The 75% from health insurance came from:
Private Health Insurance 34%
Medicare 21%
Medicaid 16%
Other government programs 4%
Total 75%
Other government programs include the Veterans Administration, the Department of Defense and CHIP, the Children’s Health Insurance Program.
Where it Went.[3]
Hospitals 33%
Physicians and clinical services 20%
Prescription Drugs 9%
Government administration and
Net Cost of Health Insurance 8%
Nursing Care Facilities 5%
Investment 5%
Dental services 4%
Other professional services 3%
Other 14%
Total 100%
Other includes durable and non-durable medical equipment, home healthcare, public health activities and other personal care such as ambulance services, and medical care delivered in non- traditional settings.
While all of these items, in theory, are necessary to operate the current healthcare system, it is interesting to note that only 53% of the total dollars spent go to hospitals and doctors. Further, according to CMS, healthcare costs are projected to increase to over $6 trillion by 2028, an increase to 19.7% of GDP and that’s assuming a GDP growth rate of approximately 4.4% per year from 2019 to 2028.[4] Those assumptions were made before the current COVID19 pandemic. In the 4th quarter of fiscal year 2020 ending June 30, 2020 GDP had shrunk by 32.9% as the pandemic took its toll on the economy.[5] The Black Jet Theory[6]would suggest that given the current impact on GDP by the pandemic, the percentage of GDP would increase to more than 20% by 2028 and that increase is not sustainable.
As more and more employers are shifting the cost of health insurance to employees through higher deductibles and co-pays, the 10% out of pocket amount is projected by CMS to increase from $375 billion in 2018 to $564 billion in 2028.[7] Continuing to add more and more cost to the family budget doesn’t seem politically palatable. It’s too early to predict but the pandemic impact would seem to further add to the sustainability problem. Government assistance to the healthcare industry has been massive. In the CARES Act, the massive $2 trillion government assistance program, hospitals were allocated $100 billion[8]out of the total $150 billion allocated for healthcare systems.[9] Many hospitals would not have survived without the assistance. The question becomes, how does the healthcare system survive once government assistance ends?
A balloon can only hold so much air. When the balloon is stretched to its limits, it pops. The healthcare balloon has held a lot of air lately. The Black Jet Theory suggests the balloon may be headed toward an unwanted end.
Don’t take my word for it, think for yourself.
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[1] Centers for Medicaid & Medicare Services. CMS Office of the Actuary Releases 2018 National Health Expenditures. Press Release December 5, 2019. https://www.cms.gov/newsroom/press-releases/cms-office-actuary-releases-2018-national-health-expenditures.
[2] Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. The Nation’s Health Dollar ($3.6 Trillion), Calendar Year 2018: Where It Came From.
https://www.cms.gov/files/document/nations-health-dollar-where-it-came-where-it-went.pdf
[3] Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. The Nation’s Health Dollar ($3.6 Trillion), Calendar Year 2018: Where It Went.
https://www.cms.gov/files/document/nations-health-dollar-where-it-came-where-it-went.pdf
[4] Centers for Medicare & Medicaid Services. Office of the Actuary, National Health Statistics Group. National Health Expenditure Data Projected. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.
[5] U.S. Gross Domestic Product (GDP) QoQ. Investing.Com. https://www.investing.com/economic-calendar/gdp-375.
[6] Snipes M. The Black Jet Theory is “the notion that most of what currently happens, when viewed through the filter of common sense and critical thinking, leads to a different conclusion, than the widespread view of current thinking by those who control the dissemination and content of information (academia, the media, politicians and other “experts”). Black Jet Theory – Volume 2020-1, May 1, 2020. Article upon request [email protected] or visit the Black Jet Theory Website at blackjettheory.com.
[7] Centers for Medicare & Medicaid Services. Office of the Actuary, National Health Statistics Group. National Health Expenditure Data Projected. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.
[8] Schwartz K, Neuman T. A Look at the $100 Billion for Hospitals in the CARES Act. March 31, 2020. KFF. https://www.kff.org/policy-watch/a-look-at-the-100-billion-for-hospitals-in-the-cares-act/
[9] Egan Y. What the CARES Act means for the health care industry. Advisory Board March 31, 2020.
https://www.advisory.com/research/health-care-advisory-board/expert-insights/2020/what-cares-act-means-for-health-care-industry