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In President Obama’s Heath Care speech to Congress on Wednesday evening, September 9th, 2009, he made two statements that referenced some MATH, specifically in regards to the rising costs of health care and the US deficit. Math is the international language that should be by its nature ‘bi-partisan’, but it is often easily manipulated and overwhelming when the numbers are large. If the math works, the politics should fall out of the equation at least when it comes to establishing some common ground. This report focuses on a cross check and the source of the math by building the numbers from the ground up.
The President said…
In his speech, President Obama said, “Then there's the problem of rising costs. We spend one-and-a-half times more per person on health care than any other country, but we aren't any healthier for it. This is one of the reasons that insurance premiums have gone up three times faster than wages”
He also said “And if we are able to slow the growth of health care costs by just one-tenth of one percent each year, it will actually reduce the deficit by $4 trillion over the long term.”
These two excerpts from the speech raise two questions:
Question #1: What is the average annual cost per person for health care in the US?
The Answer: $7,400 to $8,000 per person for health care per year
Sources: According to the March 2009 Study by The Henry J.Kaiser Family Foundation the average annual cost per American for Health care is $7,400 per person. For a complete breakdown of how we compare to other industrialized countries, see this article.
Question #2: What is the annual growth of health care costs in the US?
The Answer: 6% or $132 Billion and growing each year.
Health care costs have been rising for several years. Expenditures in the United States on health care surpassed $2.2 trillion in 2007, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980. Stemming this growth has become a major policy priority, as the government, employers, and consumers increasingly struggle to keep up with health care costs. Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, March 2009
In 2007, U.S. health care spending was about $7,421 per resident and accounted for 16.2% of the nation’s Gross Domestic Product (GDP); this is among the highest of all industrialized countries. Total health care expenditures grew at an annual rate of 6.1 percent in 2007, a slower rate than recent years, yet still outpacing inflation and the growth in national income.” Source.
Math Summary:
Let’s find the most cost effective way to cut at least $132 Million per year out of health care costs right now, and save $4 trillion in the deficit.
From the President’s speech, if we are able to slow the growth of health care costs by just one-tenth of one percent each year, it will actually reduce the deficit by $4 trillion over the long term. One percent of the $132 Billion annual growth in Health care costs is 1.32 Billion and one tenth of that one percent is 132 Million.
To reduce the deficit by multiple billions, the President’s math naturally factors in the interest penalty that we pay to borrow money and fund the deficit. Simply, the penalty for the extra costs year over year compounds dramatically, because of the financing charges from overseas investors such as the Chinese.
While the government is working on getting the public on-board, the private sector has already come up with multiple profitable solutions to solving both the Health Care Crisis and the Energy Crisis. Here is an example of one such solution from Environmental Leader.
