A study released by the Milliken Institute in 2007 found that during the year 2003 (the year on which the study focused), 109 million Americans suffered from one or more of the most common, chronic diseases, including cancer, diabetes, heart disease, pulmonary conditions, mental disorders, stroke or hypertension. This means that more than one-third of all Americans have these conditions to one degree or another. The study estimated that one year's cost of treatment of these conditions at $277 billion, but estimated lost economic productivity to be vastly higher at $1 trillion. In other words, lost work and lost output due to these illnesses is reducing the nation's GDP by about 10%. These burdens could be vastly reduced through better consumer practices and better preventative medicine. For example, obesity, lack of exercise and cigarette smoking are immense contributors to these diseases. The U.S. Surgeon General estimates that obesity alone results in 300,000 American deaths and $117 billion in health care costs each year.

Meanwhile, technology marches ahead relentlessly. Be sure to read our descriptions of such innovations as HIFU, Proton Beam Radiation Therapy and the newest biotech developments in the "Outlook for Health Care Technology" section.

Health Expenditures and Services in the U.S.:

Health care costs continue to rise rapidly in the U.S. and throughout the developed world. Total U.S. health care expenditures were projected to increase from $2.26 trillion in 2007 to $2.77 trillion in 2010, with annual increases averaging about 7%. The health care market in the U.S. in 2007 was made up of hospital care (about $697.5 billion), physician and clinical services ($474.2 billion), prescription drugs ($229.5 billion), nursing home and home health ($190.0 billion), and other items totaling $668.8 billion. Registered hospitals totaled 5,756 properties in 2006, containing 946,997 beds serving 37 million admitted patients.

Medicare, the U.S. federal government's health care program for Americans 65 years or older, provided coverage to 43.3 million seniors in 2007. By 2030, the number of people covered will balloon to about 78.0 million due to the massive number of Baby Boomers entering retirement age. Federal Medicare expenditures, excluding patients' premiums, totaled $378.6 billion in 2006 and were projected to grow to $433.0 billion in 2007.

Medicaid is the U.S. federal government's health care program for certain groups of seniors in nursing homes as well as low-income and disabled persons. The federal government incurred Medicaid expenditures totaling $180.6 billion in 2006, which was projected to grow to $191.9 billion in 2007. Together, Medicare and Medicaid represented 19.2% of the entire 2006 federal budget that was about $2.65 trillion.

State governments incur large expenses for Medicaid benefits as well. According to the Kaiser Family Foundation, total state and federal spending on Medicaid during 2006 was $304.2 billion. The cost in California alone was $34.2 billion.

Health spending in the U.S., at about 16.2% of Gross Domestic Product (GDP) in 2007, will grow to about 19.6% by 2016 unless drastic reforms take place. Health care spending in America accounts for a larger share of GDP than in any other major industrialized country. Despite the incredible investment America continues to make in health care, 15.8% of Americans (46.9 million people) lacked health care coverage for the entire year of 2006. A significant number of the uninsured, 9.2 million, were in households with annual incomes above $75,000.

Clearly, the large number of people with no coverage is a problem, but there is little-to-no agreement as to what to do about it, if anything. As the 2008 U.S. presidential elections near, there is significant debate among potential candidates about extending health care coverage, perhaps to the extent of universal health care. Even if a candidate who advocates universal care is elected to the presidency, agreement among members of Congress as to the advisability, method and funding of such care is far from certain. At the same time, large numbers of Americans are relatively well satisfied their current payors and method of coverage. Likewise, many Americans and their legislators are extremely reluctant to see government take a lager role in the health care system, fearing runaway costs, bloated bureaucracies and less competition in the marketplace. Some feel that it is not the role of government to penalize patients or employers who do not purchase coverage. Others are reluctant to see America f

ollow in the footsteps of socialized medicine in Canada and the U.K., where patients for many types of common treatments are on extremely long waiting lists or find it next to impossible to receive certain types of advanced therapies.

Health Expenditures Globally and in other Developed Nations:

A comprehensive study published by the OECD (Organization for Economic Cooperation & Development), covering 30 nations with the world's most developed economies, found stark contrasts between health costs in the United States and those of other modern nations.

In 2003 (the latest data available), the average of 29 OECD nations, including France, Germany, Mexico, South Korea, Australia, etc., but not including the U.S., spent 8.4% of GDP on health care, compared to 15% in the U.S. Health expenditures per capita (on a population base of 862 million in non-U.S. OECD nations in 2003) averaged $2,192 for 2003, compared to $5,635 in the U.S. Within North America, Canada, with its well-known nationalized health care, spent 9.9% of GDP, or $3,003 per capita. Mexico, in contrast, spent 6.2% of GDP, or $583 per capita. In Western Europe, the U.K., which likewise has a national health system, spent 7.7% of GDP, or $2,231 per capita. Germany spent 11% of GDP, or $2,996 per capita.

Globally, the total prescription drug market was in the $550 billion range in 2007. Total health care expenditures around the world are difficult to determine, but $4.5 trillion would be a fair estimate. That would place health care at about 8% of global GDP, with health care expenditures per capita at about $800. This $4.5 trillion figure breaks down to approximately $2.2 trillion in the U.S., $2.0 trillion in non-U.S. OECD nations, and $0.3 trillion elsewhere around the world. (Outside the U.S. and the rest of the OECD, that would allow $50 per capita per year in lesser-developed nations.) Clearly, there is vast disparity in the availability and cost of health care among nations, as there is with personal income and GDP.

Health Care Costs in the U.S.

Particularly in the U.S., continuous increases in the cost of health care, growing at rates far exceeding the rate of inflation in general, are hammering health consumers and payors of all types. Managed care providers continue to struggle to contain costs. Meanwhile, employers are hit hard by vast increases in the cost of providing coverage to employees and retirees. In 2007, U.S. major employers saw health coverage cost increases of about 6.1%, according to a study conducted by the Kaiser Family Foundation. This increase is more than double the rate of general inflation. (The rate of increase in 2006 was 7.7 %.) At major employers, health care insurance coverage for a typical family cost an average of $12,106 in 2007 (compared to $11,481 in 2006), according to Kaiser. Employees were required to pay $3,281 of that cost (up from $2,973 in 2006), with employers picking up the balance.

Many major employers are utilizing unique new programs in efforts to reduce employee illness, and thereby reduce costs. For example, the use of preventative care programs is growing, as is the use of employee education programs aimed at better managing the effects of diseases such as diabetes.

Smart employers are showing their employees how to use the Internet to obtain better information about diseases and prevention. Insurance providers are jumping on the Internet bandwagon as well. Some employers are even hiring in-house physicians and nurses to provide primary care in the workplace.

Patients and insurance companies are also dealing with sticker shock as the nation's prescription drug bill soars. Other factors edging costs upward include expensive new medical technologies and patients' demands for greater plan flexibility in choosing doctors and specialists at their will. At the same time, hospitals and health systems write off record amounts of revenues to bad debt, which increases costs for bill-paying patients.

In the wake of the tremendous growth of all aspects of the health care industry from the end of World War II onward, efficiency, competition and productivity were, regretfully, largely overlooked. Much of this occurred because federal and state governments paid such a large portion of the health care bill.

Physicians are caught between the desire for quality care and the desire for cost control on the part of payors, including HMOs, Medicare and Medicaid. The cost versus care debate has spawned an energetic movement to improve the quality of health care in the U.S., much of it centered on patients' rights, disease management, preventative health care and patient education.

Another major challenge facing the health care industry is the severely tarnished image of managed care companies in general. Supporters of managed care contend that its structure offers higher-quality care at a lower cost. Critics of managed care argue that the system risks lives by allowing plan managers to question, and sometimes reverse, the decisions made by medical professionals while emphasizing cost control at the expense of quality, thus sabotaging the bond of trust that should exist between doctor and patient. There is also concern among managed care detractors about the trend of mergers creating huge managed care companies. Some metropolitan markets are dominated by as few as two major health plans. Critics are equally concerned about the lack of autonomy of physicians who are forced to deal with the growing power of managed care giants.

While both supporters and critics make valid arguments, sweeping generalizations about the state of managed care are inherently flawed, since no two managed care plans are exactly alike. Neither society nor consumers can afford to turn back the clock to the traditional, considerably more expensive, fee-for-service system in which quality preventive care was largely non-existent, and patient care was generally provided without regard to cost.