The US healthcare system is a huge bubble fueled by misguided policies that are sustained by the government's ability to borrow money at artificially low interest rates. When either the policies change or the flow of credit to the US government stops, the bubble will burst.
For some perspective on the magnitude of the healthcare bubble consider that from 1990 to 2007 the cost of all items, as measured by the Bureau of Labor Statistics (BLS), rose by 159 percent while housing rose 163 percent and medical care rose a staggering 216 percent. A recent study by the Kaiser Family Foundation found that between 1999 and 2011, health-insurance premiums increased 168 percent while workers' total earnings increased only 50 percent. Over that same time period, government spending on healthcare increased 240 percent while GDP increased 62 percent. The BLS reported that over the last 50 years, the percent of workers employed in private-sector healthcare has gone from 3 percent to over 11 percent and employment has continued to grow throughout the current recession. BLS further projects that "Healthcare will generate 3.2 million new wage and salary jobs between 2008 and 2018, more than any other industry," and that "The number of wage and salary jobs in pharmaceutical and medicine manufacturing is expected to increase by 6 percent over the 2008–18 period, compared with 11 percent projected for all industries combined."
As figure 1 demonstrates, healthcare spending increased dramatically when the government (represented by total CMS spending in green in the figure) began subsidizing healthcare for the poor and elderly through Medicare and Medicaid. It continued to increase as legislation, most notably the HMO Act of 1973, and regulatory policy shifted the responsibility of health maintenance from the individual to all of those in his or her insurance pool. This was accomplished through regulations requiring insurers to cover medical services (e.g., office visits, cancer screenings, pharmaceuticals, and a wide range of therapeutic and rehabilitative services) for conditions that were not insurable events but rather part of routine health maintenance. Throughout the expansion, out of pocket spending (represented by the blue line) declined dramatically.