Rising health care costs are affecting American households and the U.S. economy as a whole. As health care costs outpace the rest of the economy, American workers are taking home less and spending more to finance the growing health care sector. According to health insurance providers, the average employer spent more than $3,000 to insure an individual employee and roughly $7,200 per family in 2004. Many small businesses and independent employers are dropping the number of employees who receive benefits, and the majority of employers are passing increasing health care costs onto employees. To make matters worse, the same employees are also financing expanding Medicare and Medicaid programs.

Since the late 1990s, health care costs and spending on medical services outpaced inflation, population growth and the gross domestic product. In 2003, health care spending reached a record-breaking $1.67 trillion or $5,670 per American. Current estimates expect healthcare spending to top $3.4 trillion or $10,700 per person by 2012. The percentage of low-income citizens spending more than five percent of their annual income on health care costs nearly doubled between 2001 and 2003 to 40 percent. In 2003, more than 40 million Americans reported difficulty paying medical bills, and roughly half of all personal bankruptcies are related to unpaid medical bills.

Spending on medical treatments, pharmaceuticals and outpatient hospital care is growing at a rate of 9.3 percent annually although the overall economy is growing at a slower rate of 3.6 percent. At the same time, the government sector accounted for a recording-breaking 46 percent of health care spending in 2002. To put this in perspective, the American public sector was responsible for 25 percent of health care spending in 1960. Due to increasing health care costs, a large population of older adults and expanded Medicare and Medicaid benefits, health care represents roughly 18 percent of the U.S. gross domestic product. On the other hand, health care spending in Switzerland, which is right behind the U.S., represents only 11 percent of that country's GDP.

The current system relies of small businesses and everyday citizens to purchase their own private health insurance and fund government programs. Economists caution that increasing health care expenses could slow growth in the health care sector and cause job dieback. As new diagnostic procedures are introduced, medical centers are constantly acquiring new equipment and ordering more procedures, tests and pharmaceuticals that result in a higher cost per person. In addition to affecting the availability of government resources, health care spending affects interest rates and national debt. As health care costs increase faster than revenue, the cost is passed on to businesses and everyday people.