Blog Posts > Taming Rising Health Care Costs
December 20, 2010

Taming Rising Health Care Costs

Over last fifty years, the cost of health care has increased dramatically in the United States. In 1960, 5 percent of the nation’s gross domestic product (GDP) went toward health expenditures. By 2008, health expenditures comprised 16.2 percent of GDP. The Congressional Budget Office (CBO) projects that total health care spending could reach 26 percent by 2035 and 41 percent by 2060. The central factors driving health care spending is the rise in new medical technologies and innovations (drugs, equipment, skills),  chronic illnesses, more long-term care and an aging population.

Growing health care spending over the coming decades will also impact West Virginia’s economy and its ability to provide health care for public employees and vulnerable state populations that participate in programs such as Medicaid and the Children’s Health Insurance Program. A 2009 report produced for the West Virginia Health Care Authority finds that health insurance costs were approximately $13.1 billion or about 21 percent of the state’s economy (Gross State Product) in 2009.The report projected that under 2009 law that health insurance spending will climb to about $24.4 billion by 2019.

ProjectedWest Virginia Health Care Insurance Spending As a Share GSP

Source: WV Health Care Authority (August 2009), CBO,  BEA

If West Virginia’s economy grows at the same projected rate as the national economy over the next ten years, total health insurance expenditures could grow from 21 percent to nearly 28 percent of the state’s economy. The sharp rise in health insurance expenditures is also expected to put more stain on the state budget. In 2009, state government spent about $1.2 billion insuring public employees and vulnerable populations. By 2019, this number is projected to increase to $2.1 billion. As a share of the state’s economy (GSP), this is an increase from 1.8 percent to 2.4 percent. Over the next ten years and beyond, the state will have to find ways to reduce health care costs or find additional revenue to make up the difference.

The good news is that the above projections do not take into account the Patient Protection and Affordable Care Act (Americare) signed into law by President Obama in 2010. Americare is estimated to expand health insurance coverage to over 184,000 West Virginia residents through an expansion of Medicaid, an individual mandate, health insurance subsides for individual and small businesses, and the creation of health exchanges. Americare is also planned to “bend the curve” in health care spending by emphasizing primary care, promoting health public initiatives and research. While the implementation of the Americare could play a significant role in reducing projected costs, the state will need to implement additional policies for containing health care costs over the coming decades.

A good place to start would be here.

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