The True Cost of Health Care

In the last several years, rising health care costs have become an issue of increasing concern for many Americans.

Health Insurance Premiums
New data* demonstrates that, even in the late '90s, health care costs rose significantly.

The average annual health insurance premium in the private sector from 1996 to 2000 saw the following increases:

•    Single coverage: up 33.3 percent, to $2,655.
•    Family coverage: up 36.7 percent, to $6,772.

National Health Expenditures
The United States spends a larger share of its gross domestic product (GDP) on health care than any other major industrialized country. Expenditures for health care represent nearly one-seventh of the nation's GDP, and they are also one of the fastest growing components of the federal budget. In 1960, health care expenditures accounted for about $20 billion. By 2000, that figure rose to $1.3 trillion, or an average of $4,637 per person.**

Growing Dissatisfaction
Dissatisfaction with the health care system is also on the rise. According to a recent Harris Poll survey, more than half of the American public said that the health care system requires "radical change." And roughly half of all health care professionals also want to see radical change.

The survey report predicted that dissatisfaction with the health care system would increase over the next few years as a result of increased out-of-pocket costs, a possible increase in the number of uninsured Americans, and concerns about prescription drug prices.

Prescription Drugs a Major Factor
While many factors have contributed to the continuing increase in health care costs, U.S. drug companies have played a significant role.

• Advertising:
  Brand-name prescription drugs are now advertised directly to consumers-in newspapers, in magazines, and even on TV. Drug companies spent $2.3 billion on ads in 2002 alone. They want to make their brands household words. The fact that you know names such as Prilosec, Zocor and Viagra is good for the drug companies, but not good for your checkbook.
• Research and Development:
  Drug research costs money. The research required to produce a new drug (including studies to prove a drug's safety and effectiveness) is more complicated, and more expensive, than ever.
• Corporate Pressure:
  Drug companies must try to increase their profits every year. Stock market pressure and the expectation that a publicly traded company will increase its profit year by year mean that drug manufacturers have to increase the price you pay for brand-name drugs.