Healthcare 2030.

Every year, all of us healthcare "people" gather in San Francisco - arguably during the most expensive week to get a hotel in the city.

The average hotel rate for San Francisco from January 13 - 16 this year jumped to $500-$3000 around Union Square area, where the conference is happening.

SF hotel rates during JPM 2020 conference

This year is a little bit special. U.S. Healthcare is now near 20% of US GDP.

And, if you take healthcare out of the U.S. economy, it would be the 5th largest country growing as fast as China. So one may ask: what's so bad about it? Isn't that a good thing?

Just like hotel prices during JPM week, what's happening to healthcare?

Healthcare outpaced economic growth overall in the U.S.

While the economy has been growing at a sub-three percent rate, healthcare spending grew at a 5-6% during the three years leading to 2016.
The Peterson Foundation, a bipartisan think tank, is estimating that healthcare will continue to outpace the economy as a whole in the next 7 years.

Hotel prices are driven by supply-demand. What drove healthcare costs?

First, here are a few things that do not make much sense if you put them together:

• Healthcare costs seem to keep going up (we all acknowledge that)
• Hospitals, where the bulk of healthcare utilizations concentrate, only incur less than 3-4% in operating margin
• Insurers, take Blue Cross Blue Shield plans, for instance, have a relatively high operating margin (in the mid-teens), but barely exceed single digit in term of net profit
• Patients saw a 160%+ increase in deductible, 6 times faster than wage growth in the past ten years