US Healthcare Costs Are Exploding: Here’s Why

We have previously written extensively on America’s soaring healthcare and health insurance costs (here, here, here and here), so instead of boring readers with even more words, here are some charts courtesy of Deutsche Bank that make a most persuasive case. Now if only the Fed, which is still convinced inflation is well below 2% and should keep easing, were to notice these.

We start with a very painful for many observation: after a period of modest quiet, healthcare inflation is soaring, with insurance inflation now the highest since before the financial crisis.

That’s just the beginning though: it’s only downhill from here for healthcare inflation. Or, rather, uphill.

It’s not just healthcare of course: as the next chart shows, there is plenty of inflation in the price of healthcare, education, and housing:

After the number of Americans without health insurance tumbled into Obama’s second term, this number has started to rise again, perhaps as a result of the surge in insurance costs.

Those who do have insurance are probably not all that happy: in the past decade, total annual healthcare premiums increased more than 50%!

The average annual premium for US families has risen to $20k in 2019.

Yet while a near record number of Americans have health insurance, ironically out-of-pocket healthcare spending has soared in recent years:

As a result, the total annual healthcare spending per family is now a record $23,000.

What is the reason for this divergence: one words – deductible. As the chart below shows, the annual deductible across all health insurance plans has tripled since 2006.

Even more ironically, the US should have the world’s best healthcare system, if only based on how much money is spent on it as a share of GDP:

As a reminder, Medicare and Medicaid spending make up more than 25% of total federal outlays.

One reason behind America’s woeful healthcare situation: 27% of the population have pre-existing conditions.

So where do Americans spend the most money? Why at hospitals of course, followed by clinics, dental, home healthcare, and prescription drugs.

Of course, if it wasn’t for insurance, prescription drugs would be in first place by a huge margin. Here’s why:

Then again, it’s not like hospital costs will drop any time soon:

One final point: just in case there is any confusion at the Fed, this is how much faster than CPI and wage inflation healthcare premiums have risen in the past two decades: