Yesterday when writing about David Goldhill's piece on health care in the Atlantic, I noted that he noted that the average American will spend $1.77 million on health care in their lifetime (this includes their employer's contribution). This is an astounding number. I thought I'd do my own math. And when I did, I actually got a number slightly higher than Goldhill's.
Here's my math. Assume you start paying the average family health insurance rate of $12,000/year beginning at the age of 26. You continue paying that rate until your death at, say, 85. Assume the cost of health care increases at a rate of 3% per year. Using the future value function in excel, that's a total of $2.02 million in health care payments over the 60 years that you're paying for health care. And keep in mind that this assumes that the rate that health care costs are rising is only 3%. Given the increasing cost of health care over the last several years this is a very conservative number. If health care costs continue to increase at their current rates, we could be paying twice that amount.