Why Health Care Costs are Skyrocketing

A nifty chart put together by the Mercatus Center helps explain why health care cost continue to skyrocket – a growing role for third-party payers and of government subsidies.

On average, consumers’ out-of pocket healthcare costs increased 6.7% each year, while national healthcare expenditures increased by an average 9.8% each year. Increases in expenditures by private insurers, Medicaid and Medicare accounted for the majority of this excess cost growth; since 1965 private insurers’ spending has increased by an average 10.8% annually, Medicaid spending has increased by an average 15.4% and Medicare spending has increased by and average 15.6% each year.

This was also one of the themes of our report on the Prognosis for National Health Care, in which Arthur Laffer refers to the growing wedge between consumers and doctors, driven by government intervention in health care.