So, now everyone is living longer thanks to improved quality of life and better medicines. That’s a good thing, right? Well, yes and no.
Longer life expectancy and more active life means higher productivity, thus higher GDP and a bigger economy that can employ more people and creates more tax revenues for governments.
That’s good but it’s not the whole story. Since the new treatments began to outstrip the ability of most people to pay for them, around the middle of the twentieth century, most developed nation governments began to provide health insurance for some or most of their population.
It started out as insurance for the elderly and the poor, and in many countries it soon became government-sponsored universal insurance.
Although universal coverage is not the case in the United States yet, starting in the sixties, US government signed a contract with people over sixty five and guaranteed healthcare to all over that age. At the time, it was projected that this group would constitute only three percent of the population.
Smart government statisticians said that the government would be able to honor this contract long-term.
Well, fast forward some fifty years and now we find ourselves in an entirely different situation.
The percentage of people over sixty five is far above the initial projected three percentage, and rising fast. Life Science companies are developing biologics, expensive devices, and much more.
Medical costs have been rising at a much faster rate than the GDP and suddenly the government is trying to figure out how to honor their contracts with their people.
The cost of medical care is taking an ever increasing percentage of government budgets and is leaving less and less to invest in education, infrastructure, and technology (which is how you grow the economy!) So, what are they going to do? Well, we will discuss that next.