Health Care Costs – Part 1, "The Problem"

July 5, 2012

(This article was first published on Graph of the Week, and kindly contributed to R-bloggers)

yearly health care costs graph
The Problem

In the United States, health care costs have been going up for a number of years, even when adjusted for inflation. Not unlike a runaway freight train, this rampant inflation cannot continue indefinitely without crashing.


What is ‘health’, anyway? According to Steven Jonas, MD, Raymond Goldsteen, DrPH, and Karen Goldsteen, PhD in their book An Introduction to the U.S. Health Care System, the World Health Organization (WHO) defined it in 1946:

“Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.”

Interesting. When is the last time any of us felt like this was the goal of health care in the U.S.? They go on to say:

“Indeed, the WHO definition is ‘honored in repetition, rarely in application.'”

So, even when ‘health’ (as defined here) is only applied in a narrow scope, the costs are still increasing quickly – and outpacing inflation (otherwise the lines above would be flat).

Out of Control

An article written for the Robert Graham Center (“Who will have health insurance in the year 2025?“)  postulates that by the year 2025 the costs of insurance premiums will surpass household income. Below is the graph from that article depicting this forecast:

Practically speaking, there is no way the above situation can occur as no business can survive if priced out of existence. However, it illuminates the problem and provides a time frame in which it must be solved. Bottom line: we’re on the clock to solve this burgeoning crisis.

That being said, health care is not cheap and were it not for some intervening factors right now, it would cost a lot more. In their (excellent) book, The Innovator’s Prescription: A Disruptive Solution for Health Care, authors Clayton M. Christensen, Jerome H. Grossman, M.D., and Jason Hwang, M.D. note:

“Today, it’s very expensive to receive care from highly trained  professionals. Without the largesse of well-heeled employers and governments that are willing to pay for much of it, most health care would be inaccessible to most of us.”

True words, indeed.


Clearly, health care costs are on the rise; perhaps we are on the verge of a vicious cycle. Historically speaking, this isn’t the first time health care has been addressed. Beliefs range from total government healthcare to total private health care and all points in between. Regardless of where a person stands philosophically, the reality is that health care in the United States is getting out of control. In this series of articles, we’ll explore both the factors and non-factors in this phenomenon and hopefully some shed some light on this complicated topic. 

– continue to Part 2 –

1) What other solutions have been provided to reverse the rising trend of health care?
2) How long can the above trend continue if nothing changes – 2025?
3) Is our national weight gain problem a factor?


These graphs were generated using the ‘ggplot2‘ and ‘maps‘ packages within the R programming language. Additional graphics were created/edited using GIMP.

ggplot() +
    geom_point(, aes(x=Year, y=Per.person.expense.mean, color="Average"), size=3) +
    geom_line(, aes(x=Year, y=Per.person.expense.mean, color="Average"), size=2) +
    geom_segment(aes(x=2008.6, xend=2009.06, y=5000, yend=4950, color="Average"), size=2) +
    geom_segment(aes(x=2008.8, xend=2009.05, y=4600, yend=4950, color="Average"), size=2) +
    geom_point(, aes(x=Year, y=Out.of.pocket, color="Out of Pocket"), size=2) +
    geom_line(, aes(x=Year, y=Out.of.pocket, color="Out of Pocket"), size=1, linetype=2) +
    geom_point(, aes(x=Year,, color="Private Insurance"), size=2) +
    geom_line(, aes(x=Year,, color="Private Insurance"), size=1, linetype=3) +
    geom_point(, aes(x=Year, y=Medicare, color="Medicare"), size=2) +
    geom_line(, aes(x=Year, y=Medicare, color="Medicare"), size=1, linetype=4) +
    geom_point(, aes(x=Year, y=Medicaid, color="Medicaid"), size=2) +
    geom_line(, aes(x=Year, y=Medicaid, color="Medicaid"), size=1, linetype=5) +
    geom_point(, aes(x=Year, y=Other, color="Other"), size=2) +
    geom_line(, aes(x=Year, y=Other, color="Other"), size=1, linetype=6) +
    ylab("Per person annual average expenditures\n (in dollars)\n") +
    xlab("Year") +
    scale_colour_manual(values=wideBluePalette) +
    scale_y_continuous(labels = mysep) +
    scale_x_continuous(breaks=1996:2009) +
    opts(title="Health Care Expenses\n (adjusted for inflation)\n",
        legend.title = theme_blank(),
        panel.background = function(...)pngob, title="library(png)",
        axis.line = theme_segment(),
        axis.title.x=theme_text(size=14, vjust=-0.4),
        axis.title.y=theme_text(size=14, hjust=0.5, angle=90))

Further Reading:

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