Healthcare Costs: a Problem That Won’t Go Away

Tuesday's presidential debate has everyone talking about healthcare reform. But that's an issue that has been on the mind of small-business owners for some time. I just recently interviewed Thomas Sullivan, the outgoing chief counsel for advocacy at the Small Business Administration, for a Q&A that should be up next week. He told me that, during his tenure at the SBA, the one constant has been that the soaring cost of healthcare is the No. 1 problem cited by small-business owners.

One "solution" to rising healthcare costs is to have more things like smoking bans and regulations on fatty foods in an attempt to force people to lead healthier lives. The rub is that when people live longer, new healthcare costs pop up because there's more demand for care in old age.

In fact, a new study by Robert W. Fogel of the University of Chicago finds that increases in life expectancy—which are sure to continue thanks to lifesaving medical technology—only have a "modest" effect on healthcare costs. Taking into account those advances, here is what Fogel forecasts:

...income expenditures on healthcare in the United States are likely to rise from a current level of about 15 percent to about 29 percent of GDP in 2040.

Small-business owners need to care about what future presidents and Congresses intend to do about healthcare because, barring reform, they are going to worry about healthcare costs for quite some time.