Health services spending growth picked up in recent quarters
The latest Quarterly Services Survey data show possible signs of a modest uptick in health spending. This modest increase in health services spending could be the result of more people insured through the Affordable Care Act and an improving economy.
Total health expenditures have increased substantially over the past several decades
Health spending totaled $74.6 billion in 1970. By 2000 health expenditures had reached about $1.4 trillion and in 2015 the amount spent on health had doubled to $3.2 trillion. Total health expenditures represent the amount spent on healthcare and health-related activities (such as administration of insurance, health research, and public health), including expenditures from both public and private funds.
On a per capita basis, health spending has grown substantially
On a per capita basis, health spending in 2015 ($9,990 per person) was about 28 times the spending in 1970 ($355 per person). In constant 2015 Dollars, spending increased from $1,742 in 1970 to $9,990 in 2015.
Health spending growth has outpaced growth of the U.S. economy
Another way to examine spending trends is to look at what share of the economy is devoted to health. In 1970 the U.S. devoted 6.9% of its gross domestic product to total health spending (both through public and private funds). By 2015 the amount spent on health had increased to 17.8% of GDP. Health spending as a share of the economy often increases during economic downturns and remains relatively stable during expansionary periods.
Health spending growth has slowed, and is now on pace with economic growth
From 1970 – 1980, the average annual growth in the U.S. economy was 9.2% per year, compared to health spending growth of 12.2%. Although health spending growth has since moderated, it generally continued to outpace growth of the economy, though by a somewhat smaller margin. The 2010 – 2013 period, however, saw an average annual growth rate in health expenditures that was similar to growth in GDP. Health spending did pick back up in 2014 and 2015 with the coverage expansions of the Affordable Care Act.
Spending on hospitals, physicians, and prescriptions has grown at varying rates
The rate of growth for medical services (e.g. physicians/clinic, hospitals) varies by service type. During the 1970s growth in hospital expenditures outpaced other services, while during the 1980s prescriptions and physicians/clinics saw larger growth.
Hospital and physician services represent half of total health spending
Hospital spending represented 32% of overall health spending in 2015, and physicians/clinics represent 20% of total spending. Prescriptions accounted for 10% of total health spending in 2015, which is up from 7% of total spending in 1970.
Out-of-pocket spending represents a smaller portion of total expenditures than it did in 1970
Although out-of-pocket costs have been rising on a per person basis, insurance coverage spending has grown even faster. As a result, out-of-pocket spending, though higher per person than it was in 1970, is now a smaller portion of total health expenditures.
Per capita out-of-pocket expenditures have grown since 1970
In dollar terms, out-of-pocket expenditures have grown steadily since 1970, averaging $1,054 per capita in 2015, up from $119 per capita in 1970 ($583 in 2015 dollars). Out-of-pocket medical costs are in addition to the amount individuals contribute towards health insurance premiums.
On average, larger shares of household budgets are devoted to health expenses than 10 years ago
The share of household budgets devoted to health expenditures has increased about 18% from 2002-2012. The majority of the increase can be attributed to spending on insurance premiums.
A larger portion of household spending on health is on insurance premiums, and smaller portion on OOP costs
The portion of household spending on health expenditures has increased from 2002 to 2012. Spending on health insurance was 51% of household health expenditures in 2002 and was 59% in 2012.
Health insurance represents a growing share of total health expenditures, particularly public programs
Most of the recent health spending growth is in insurance programs, both private and public. Private insurance expenditures now represent 33% of total health spending (up from 21% in 1970), and public insurance (which includes Medicare, Medicaid, CHIP, and the Veterans Administration and Department of Defense), represented 41% of overall health spending in 2015 (up from 22% in 1970).
Medicare and private insurance growth have been similar, but Medicare growth has slowed recently
On a per enrollee basis, the average annual growth of Medicare spending was similar to that of private insurance over the course of the 1990s and 2000s. More recently, per enrollee spending in Medicare has grown somewhat slower than per enrollee growth in private insurance.
Public and private health spending have both grown substantially, but public spending has grown faster
In 1987, public sector spending accounted for just under one third (32%) of total health spending. Since then, health spending through government funds has grown faster than private spending, and public spending now represents almost half (46%) of overall spending. Public sector spending includes spending on insurance programs, such as Medicare and Medicaid, as well as other government spending, such as spending on public health and research.
Administrative costs have risen over time but have recently moderated
In 2015 administrative expenses – which include the cost of administering private insurance plans and public coverage programs but not the administrative costs of health providers – represented 8% of total national health expenditures, up from 4% in 1970.
Spending on public health has increased, particularly by state and local governments
Spending on public health has grown since the 1970s, and the majority of this growth is from state and local governments. Public health spending has been relatively flat in recent years, however, following the Great Recession.
Prices have historically driven health services spending growth, but it’s now a mix of price and use
Health services spending is generally a function of prices (e.g. the dollar amount charged for a hospital stay) and utilization (e.g. the number of hospital stays). For most of the 1980s and 1990s, healthcare price growth in the U.S. outpaced growth in utilization. However, most recently, growth in utilization of healthcare has been similar to price inflation, though utilization has grown following the recession as prices continued to fall.
Growth in the use of pharmaceuticals has outpaced price growth for most of the past 2 decades
Pharmaceuticals and other medical products have followed a somewhat different pattern from health services spending. For much of the past two decades – with the exception of the period surrounding the economic downturn – growth in utilization outpaced growth in pharmaceutical prices.