It is unfortunate that so much has been done in recent years to sensationalize the periodic reports from the Office of the Actuary at CMS on spending trends and projections over the next ten years. That the percentage of GDP devoted to health care would increase sharply in a year in which GDP declines should not surprise anybody. This focus unfortunately distracts us from the enormous economic and fiscal challenge of health care spending growing on average by 2 percentage points per year in excess of GDP. Not only will this make insurance unaffordable for more and more people, but it will impose enormous strain on governments that have revenue growth roughly equal to GDP growth. Rather than simply reporting the 2009 headline, journalists should be asking the authors why their long-term projection of the gap between spending and GDP at 1.6 percentage points per year is so much lower than it has been in the past. How much of this is a reflection of the fiction that SGR will reduce Medicare physician payment rates by 21 percent at the end of this month? Beyond SGR, is there a basis for expecting a slowing of cost trends in relation to GDP? How stringent a response on the part of the private sector is envisioned (since the Actuary is not permitted to project changes in federal policy)? This is the discussion that the projections report should be stimulating.

I suppose we’re being a bit misled because the denominator (GDP) fell and the numerator (health care spending) did not. But beyond that, the fundamental problem remains the same.

There is no limit on how much patients will spend on health care as long as the money isn't coming out of their own pockets.I

In this regard, we are not worse off than other countries. We are just like them. The rate of growth of real health care spending per capita in the US over the last 40 years is right at the OECD average.

Americans' health care consumption increased 5.7 percent in 2009 to 17.3 percent of GDP or $2.5 trillion, a rare piece of good news in a year in which overall economic activity declined by 1.1 percent. The health care sector produces its product, widely acknowledged as providing long-term benefits for consumers. It employs a wide range of Americans, from the moderately-skilled hospital orderlies and aides to the well-trained nurses, physicians, and surgeons. Interestingly, this increase in econmic activity did not pinch the pocketbooks of the average American, as only 11 percent was taken from after tax income. This percent increased at only 2.1 percent, much less than the overall inflation rate of the sector.

Experts who study these issues are optimistic that this trend will continue and Americans, on average, will by 2019 devote nearly one in five consumption dollars to bettering their health. Given the growing overall economic pie, this will not necessarily mean fewer real dollars directed at such things as housing, food, sports events, dining out, and alcohol. It does, however, mean that these items' share of the overall economy will diminish. Experts warn that one trend is in fact worrisome. Federal and state governments, the sector's least innovative and least effective participants at controlling fraud and abuse and increased costs, are expanding their share of the market--50 percent last year, the highest percentage in history.

I do believe that a large number of the media stories on the health spending statistics--assuming increased health spending is a net negative, focusing on a percent of GDP as if it is a given that less is preferable to more, and tying it to the President's currently stalled health care plans--leave room for other fundamental questions.

What exactly is the correct amount of spending, in aggregate and as a portion of GDP? Is it even meaningful to speak of total spending, as if it's controlled by someone or some process, when in our decentralized system, it is merely a product of millions of individual decisions? Canada has a single-payer health care system where government is the only provider of health care. It spends about 9 percent of its GDP on health care because that is what the government can afford. As a result, Canadians face long waiting lists, rationed care, and lack of access to the latest technology. Waiting lists are the only way government can control its total health care spending. It is noteworthy that Danny Williams, the premier of Newfoundland, chose to come to the U.S. for his heart surgery rather than have it done in Canada.

I don't know if spending 17.3 percent of GDP is too much, perhaps it is too little. Americans demand the very best in health care and it is expensive. They would not be pleased to have to be told that they have to wait for a procedure or be denied care.

Today researchers from the Centers for Medicare and Medicaid Services, writing in the journal Health Affairs, reported that U.S. health spending reached $2.5 trillion in 2009, and that health care’s share of the economy grew 1.1 percentage points to 17. 3 percent—the largest one-year increase since the federal government began keeping track in 1960. These findings underscore the need for comprehensive health care reform that will help rein in the unsustainable spending growth that is placing an increasing burden on American families, businesses, and state and local governments.

Clearly the nation’s sluggish economy was a big reason for the increase in percentage of health spending as a share of gross domestic product (GDP), which actually shrank by 1.1 percent in 2009. Of greater concern for the future of our health system and the health of our economy is the projection that health spending will increase to nearly one-fifth—19.3%—of GDP by 2019, with a growing number of uninsured and underinsured—as more businesses find it difficult to pay for adequate insurance coverage for employees, and as more Americans lose their jobs. Inefficiencies in our health care system and the lack of incentives to provide high quality, cost effective health care play a large role in rising costs.

These untenable increases in health care costs and the economic hardship it poses for middle-class families lend additional evidence that we cannot afford to continue on our current path—spending much more than other countries do for health care that falls short on many meausures of quality and avoidable deaths and disability, while nearly 50 million Americans are uninsured, and 72 million working-age adults struggle to pay medical bills or have accumulated medical debt.

Congress should aim not to miss this historic opportunity to reform our health care system and put us on the path to a high performance health system and a healthy economy. Comprehensive reform will help control spending, and it will finally put the U.S. on track to get real value for its health care dollars.