Jonathan Gruber and Helen Levy have a paper in the Fall ’09 Journal of Economic Perspectives on the risk of high medical spending households face, and how that has changed over time. They show that private health spending per capita has gone from $700 in 1960 to $3,500 in 2007, and government health spending has gone from $250 to $3,500 in the same period. Meanwhile, out-of-pocket spending has merely doubled. Almost all of the increase in private spending is due to higher insurance.
They conclude that
“the real problem facing the health insurance system in the United States is not so much the risk of high spending by individual households as the systematic risk of increasing aggregate spending. Much of the public discussion about health insurance reform focuses on inadequate coverage, but uninsurance is not obviously worse than it once was, and public policy has stepped in to fill important gaps…The fact that the real problem is systematic risk rather than individual risk may explain a paradox of the current debate: while everyone claims to believe that the health care system is broken, a large chunk of citizens seem none to excited about fixing it.”
Perhaps exposing more individuals to the actual risks of rising healthcare costs a necessary step to getting political support for the radical reforms we probably need. As long as individuals are shielded from directly bearing the costs the political will may never be there. Related question, will politicians ever be able to pass a policy whose goal is to expose voters to true costs? Hiding costs from voters seems to be a primary policy goal in our country.