Health Business Blog

The Kaiser Family Foundation’s Drew Altman does some Simple Arithmetic to demonstrate that the average cost of a family health insurance policy could reach $30,000 in ten years, which is kind of nuts in an era where overall price levels are likely to be pretty flat and so are wages. The law of compounding will eventually catch up with us. Health care costs simply can’t keep rising like this forever. On the other hand, Altman assumes an 8.7% compound annual rate of growth while we just learned  that in Massachusetts we can expect rates to rise 10 percent next year.

It also seems that one way or the other we’re moving toward a Massachusetts model, where insurance is mandatory for most everyone. Since a lot of people can’t afford even today’s costs ($13,375 per year according to Altman) there need to be subsidies to help with the costs.

But unless we’re going to increase budget deficit spending forever, someone has to pay for those subsidies. And of course those people also have to pay for their own health insurance. There’s a pretty limited number of people who will be able to pay $30,000 per year in health insurance premiums and contribute a meaningful amount toward subsidies for others. Once we run out of rich people and the Chinese stop buying Treasury bonds so readily we’ll have to face up to costs.

I think the cost curve is going to bend downward within 5 years and that we won’t see $30,000 premiums for at least 15 years.

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