U.S. healthcare spending nearing 20% of GDP

The WSJ reports that healthcare spending in the U.S. will soon reach 20% of GDP, a significantly higher proportion than any other major economy. The key cost driver has been price hikes, not increased demand. Since 1960, the CPI has risen ~700% while medical costs have risen 2,000%. Since 2000, prescription drug costs have grown 69%, hospital care 60% and physician and clinical services 23%.


Despite leading the world in healthcare spending, the U.S. lags other developed countries in many major measures of health, including life expectancy, the incidence of diabetes, heart disease, respiratory disease and infant mortality.


Consumers continue to be shielded from the bulk of the costs through insurance and tax breaks while corporations are able to deduct the costs of providing health insurance from their taxes, estimated at $854B last year.


Since 1985, the percentage of expenditures for healthcare for consumers has risen from less than 5% to 8%.


The average market price of AbbVie's HUMIRA was $1,385 (95% of list) in Q3 2004 and $3,431 (84% of list) in Q3 2016, reflecting, in part, increasing rent from PBMs.

Consolidation in hospitals have given them more clout to demand higher prices from insurers. For example, in markets with monopoly hospitals, the cost of a lower limb MRI is over 23% more than markets with at least four hospitals.


The percentage of S&P 500 revenues reported by healthcare companies has risen from 4% in 1985 to almost 16% last year (the profit percentage would be more informative considering consolidation within the sector).


Healthcare companies have more than doubled lobbying spending since 1998, creating a headwind against meaningful changes to the status quo.


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https://seekingalpha.com/news/3376018-u-s-healthcare-spending-nearing-20-percent-gdp

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