Healthcare Costs vs Median Income
Per-capita national health expenditure in nominal dollars
“Healthcare became unaffordable after 1971 when fiat money caused prices to spiral.”
Healthcare spending per capita rose from $146 in 1960 to $14,570 in 2023, vastly outpacing income growth. The causes are structural: third-party payment systems, administrative complexity, drug pricing, aging demographics, and technological advances that add cost without market discipline.
Perspectives
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Structural incentives, demographics, and technology drive healthcare inflation
Healthcare costs rose due to third-party payment removing price discipline, administrative waste, drug monopolies, and an aging population demanding more care.
The timing partially aligns with 1971, but Medicare and Medicaid (1965) were already transforming the market before the gold standard ended. The real acceleration came from structural incentives that reward volume over value and opacity over transparency.
Causal Factors
Third-party payment & price opacity
30%When insurance or government pays, consumers don't see true costs and providers face weak price competition. 90% of healthcare spending is paid by third parties.
Administrative complexity
25%The US spends ~34% of healthcare dollars on administration — billing, coding, insurance processing. Canada spends ~17%. This adds ~$1 trillion in unnecessary costs annually.
Drug pricing & patent monopolies
20%US drug prices are 2-3x higher than other developed nations. Patent protections and lack of government negotiation (until 2022 IRA) keep prices high.
Technology adoption without cost discipline
15%New medical technologies are adopted for marginal benefits without cost-effectiveness analysis, unlike other countries that use bodies like NICE (UK).
Aging population
10%The 65+ population has grown from 9% to 17% since 1960. Per-capita healthcare spending for seniors is 3-5x higher than for younger adults.
Data Source
Centers for Medicare & Medicaid Services (CMS), National Health Expenditure Data
View original dataLast updated: 2024-12
Key Events
Medicare & Medicaid created
Government enters healthcare market, dramatically expanding demand and coverage
HMO Act
Health Maintenance Organization Act encourages managed care
DRG system
Medicare shifts to prospective payment, changing hospital incentives
Medicare Part D
Prescription drug benefit adds major new government spending
Affordable Care Act
ACA expands coverage to millions but adds system complexity