There is great debate around the causes of why healthcare is so expensive and why the cost increases every year regardless of the economy.
There are major questions about why the U.S.spends (approximately $650 billion) more than the rest of the world for healthcare. We spend twice as much on healthcare than we do on food and more than the entire country of China spends on all goods and services (that is a lot of consumption).
The gurus at McKinsey and Company (the largest consulting company in the world), recently updated their January, 2007 report to give more insight into the rising cost of healthcare.
They account for this difference, largely due to the elasticity of demand, whereas the supply for healthcare increases so does the demand, and this is primarily so, because most Americans do not have an idea of what the real cost of healthcare is, and how to figure that out.
Insurance has, by and large kept hidden, the true costs so consumers only pay a small portion of the bill directly out-of-pocket.
The puzzle in all of this is that healthcare costs more in the U.S. despite that the overall population is not fully insured and healthcare statistics show we are healthier than many countries of the developed world.
These documents provide an excellent primer on the healthcare economy and a must-read for those involved in the healthcare debate:
Accounting for the Cost of HealthCare: A New Look Why Americans Spend More.