Question

1. Some experts estimated that national health spending in the United States grew at 1% in excess of the growth rates of GDP. Assume that this trend would persist for the foreseeable future, and given the fact that the share of GDP on health spending stood at 18% in 2016, what would become the share in 2064, 45 years from now (and 48 years from 2016, the base year), when most of you would enter the traditional retirement age? We should assume that GDP would grow at 3% annually. Do you have a problem with the number you arrive at?

Answer 1

Answer (1) : The National health spending in the United States has grown at 1% in excess of the GDP growth rate of the year.

                                i.e. if we assume the GDP growth rate to be X , then health spending = (X+1)

In 2016, the share of GDP on health spending stood at 18%.

Since the spending on the health sector is increasing by 1% , hence by this growing trend, in 48 years, the share of the health spending should be 18% x 48(X+1) (This trend of 1% growth every year is highly impossible, but since it is given that we may suppose it to grow every year). We should not here that the value of the GDP will not remain constant after 48 years.

                             The value of 18% x 48(X+1) will be a huge figure after 48 years, presumably around 55% to 60% of the total GDP. This is a very welcoming and a great news for the health sector. However, if the health sector gets about 60% of the total GDP share, the other sectors of the country might suffer with lesser funds and Government support. Hence , it is advisable to not let the share of health sector in go above 25%-30% , as US is already a stable country with regards to the health sector.