Page last updated at 10:16 GMT, Tuesday, 17 June 2008 11:16 UK

Bernanke warns of healthcare bill

Ben Bernanke
Ben Bernanke warned rising healthcare costs could hurt the US economy

US Federal Reserve chairman Ben Bernanke says rising healthcare spending may strain public finances and harm the US economy.

He told delegates at a Senate Finance Committee meeting on healthcare the government may have to help households meet rising medical costs.

Mr Bernanke said that lower income households would be hardest hit as doctors bills and insurance fees rise.

Healthcare spending makes up more than 15% of US gross domestic product.

Mr Bernanke said: "Higher government spending on healthcare, will of necessity, require reductions in other government programmes, higher taxes or larger budget deficits."

He warned that the 47 million Americans without medical insurance would be a major issue in the looming presidential election.

"Access to healthcare is the first major challenge that healthcare reform must address," he added.

Cost focus

Mr Bernanke's comments were supported by a report by audit firm PricewaterhouseCoopers (PwC) which predicted employer medical costs would rise 9.9% in 2008 and 9.6% in 2009.

According to the report, the increase was being fuelled by the acceleration of hospital building and improvements.

Costs being "shifted" from the uninsured and those receiving medical aid to private payers is also causing the rise.

In the US, hospitals have relied on cost-shifting to make up the shortfall when some patients fail to pay for treatment.

This means the privately insured face higher medical costs, effectively subsidising those without insurance.

Schemes for the elderly and the poor, and tackling the large numbers of uninsured, will make up nearly one in every four dollars spent by private insurers in 2009, the study said.

"Health care providers, insurers and employers will have to monitor medical costs carefully if we are to avoid a resurgence of the double-digit annual increases seen in the past," said Dr David Chin, leader of PwC's Health Research Unit.

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