How has U.S. spending on healthcare changed over time?

This chart collection explores National Health Expenditure (NHE) data from the Centers for Medicare and Medicaid Services (CMS). These data offer insights into changes in health spending over time in the U.S. as well as the driving forces behind spending growth. The data specifically show how healthcare spending changed in 2022 after deviating from historical trends in recent years due to the COVID-19 pandemic. A related interactive tool contains more of the latest NHE data.

Total health expenditures increased moderately in 2022

Health spending totaled $74.1 billion in 1970. By 2000, health expenditures had reached about $1.4 trillion, and in 2022 the amount spent on health tripled to $4.5 trillion. In the first year of the COVID-19 pandemic, health spending accelerated by 10.6% from 2019 to 2020. Health spending increased by 4.1% from 2021 to 2022, somewhat faster than the 3.2% increase from 2020 to 2021. The growth in total health spending from 2021 to 2022 is similar to the average annual growth rate of the 2010s (4.8%).

Total health expenditures represent the amount spent on health care and related activities (such as administration of insurance, health research, and public health), including expenditures from both public and private funds.

In the chart above, spending is shown in terms of both nominal dollar values (not inflation-adjusted) and constant 2022 dollars (inflation-adjusted based on the personal consumption expenditures (PCE) index). Inflation in the rest of the economy increased faster than health sector inflation in 2022. Adjusting for economywide inflation, national health spending decreased -2.2% in 2022 from the previous year. The federal actuaries deflate health spending in their report using an aggregate of healthcare-specific consumer and producer price indices for specific commodities or services. Using the NHE deflator, real national health expenditures increased by 0.9% from 2021 to 2022.

Health spending grew from 2021 to 2022 across almost all categories

Total national health expenditures grew by $175 billion in 2022 from 2021. About one-third of that growth in spending can be attributed to increases in spending on top 2 categories: hospital expenditures and retail prescription drugs. An increase in administration costs, physician and clinic expenditures, long-term services, and medical goods also contributed to the growth. Dental service expenditures increased by just 0.3% in 2022, much slower than the growth of 18.2% rebound in 2021 after a drop in the first year of the pandemic.

The increases were slightly offset by a decrease in federal public health spending. As the pandemic entered its third year in 2022 public health spending fell by $2 billion from 2021 (a total drop of $33 billion from 2020), but remains significantly higher than pre-pandemic.

Federal spending on public health decreased for the second straight year in 2022 but remains above pre-pandemic levels

Spending on public health fell slightly from 2021 to 2022, after the sharper decrease in 2021 driven by the expiration of many federal policies related to the COVID-19 pandemic. Federal public health spending decreased by 9.0%, from $101.1 billion to $92 billion from 2021 to 2022. Meanwhile, state and local public health spending grew by 6.3%, in line with previous years.

Per person health spending reached $13,493 in 2022

On a per capita basis health spending has increased in the last five decades, from $353 in 1970 to $13,493. In constant 2022 dollars, the increase was from $2,072 in 1970 to $13,493 in 2022.

Health spending as a share of GDP fell to pre-pandemic levels in 2022

The share of the gross domestic product (GDP) devoted to health care reached 19.5% in 2020, an uptick from prior years as health spending increased and GDP decreased. In 2021, total national health expenditures as a share of GDP fell to 18.2% as the economy recovered and health spending increased moderately. The share of GDP that is health spending fell further to 17.3% in 2022 as GDP growth, driven by general inflation, continued to outpace growth in health spending. As of 2022, health spending represented a similar share of the economy as it did prior to the COVID-19 pandemic.

Health spending growth slowed in recent decades but consistently exceeded GDP growth until 2021

From 1970 through 1980, the average annual per capita growth in the U.S. economy was 9.3% per year, compared to per capita health spending growth of 12.0%. Although health spending growth rate has since moderated, it generally continues to outpace growth of the economy. After a period of recession during the first year of the COVID-19 pandemic, the economy recovered in 2021 and 2022, with GDP per capita increasing at an average rate of 9.6%. Per capita national health expenditures increased by 3.4% on average from 2020 to 2022.

Since 2020, spending growth on hospitals has increased

During the 1970s, growth in hospital expenditures outpaced other services, while prescriptions and physicians/clinics saw faster spending growth during the 1980s and 1990s. From 2020 to 2022, retail prescription drugs experienced the fastest growth in spending at 7.6%, following 3.3% average annual growth from 2010 to 2020. Average spending growth for hospitals and physicians/clinics between 2020 and 2022 was 3.4% and 4.0%, respectively.

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Hospital and physician services represent half of total health spending

Hospital spending represented close to a third (30.4%) of overall health spending in 2022, and physicians/clinics represented 19.8% of total spending. Prescription drugs accounted for 9.1% of total health spending in 2022.

Per capita out-of-pocket expenditures increased in 2022

Out-of-pocket expenditures increased in 2022, averaging $1,425 per capita (out-of-pocket medical costs do not include the amount individuals contribute toward health insurance premiums).

However, in 2022, real out-of-pocket spending remained relatively stable from the previous year, decreasing slightly from $1,428 to $1,425. This was mainly caused by slower growth rates in out-of-pocket spending for dental services, durable medical equipment, and physician and clinical services, which collectively accounted for 34% of all out-of-pocket spending in 2022.

Health insurance is a growing share of total health expenditures and out-of-pocket spending is a smaller portion than in 1970

Private insurance expenditures now represent 28.9% of total health spending (up from 20.4% in 1970), and public insurance (which includes Medicare, Medicaid, CHIP, and the Veterans Administration and Department of Defense), represented 43% of overall health spending in 2022 (up from 22% in 1970). Although out-of-pocket costs per capita have also been rising, compared to previous decades, they now make up a smaller share of total health expenditures.

On a per enrollee basis, private insurance spending has typically grown much faster than Medicare and Medicaid spending

Per enrollee spending by private insurers grew by 61.6% from 2008 to 2022 — much faster than both Medicare and Medicaid spending growth per enrollee (40.8% and 21.7%, respectively). Generally speaking, private insurance pays higher prices for healthcare than Medicare and Medicaid.

Per enrollee spending by Medicaid rose by 2.2% in 2022 from the previous year, and also continued to increase in private insurance and Medicare (4.3% and 3.8% respectively). Medicare and private insurance per enrollee spending continued to grow faster in 2021 and 2022 after slower growth in 2020. Medicaid per enrollee spending previously declined in 2021 as total enrollment grew, particularly among children and non-elderly adults, who generally have lower per enrollee spending.

Per enrollee spending varied in 2022 after decades of growth for all major payers

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. Average annual spending growth per enrollee in Medicaid was similar to growth for Medicare and private insurance in the 1990s but slowed in the 2000s. After a decade of slower growth for all major payers in the 2010s, per enrollee spending increased for Medicare and private insurance and also increased by a marginal amount (0.3%) for Medicaid between 2020 and 2022.

Almost half of health spending in the U.S. is by federal, state, and local governments

Public and private health spending have both grown substantially in the past few decades. In 1987, public sector spending accounted for just under one-third (32%) of total health spending. Public spending in 2022 represented just under half (48%) of overall spending after briefly exceeding private spending in the first year of the pandemic. 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.

Health insurance and administrative costs have generally been increasing for several decades

In 2022, administrative expenses – which include the cost of administering private insurance plans and public coverage programs but not the administrative costs of health providers – represented 7.5% of total national health expenditures, up from 3.5% in 1970, and down from a high of 8.3% in 2020.

Health utilization increased in 2022 at a rate similar to pre-pandemic

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). In 2022, healthcare prices increased by 2.4%, in line with previous years, while health services use increased by 3.1%, a return to typical pre-pandemic utilization increase levels. There was a much larger increase in healthcare use in 2021, following a sharp decrease in 2020. This sharp decline was largely driven by the COVID-19 pandemic, as many health services, such as elective surgeries, were postponed or cancelled.

Growth in price and utilization of pharmaceuticals has varied over the past two decades

Due to the way drugs are selected for inclusion in the price index, it can take some time for new drugs to be reflected in the data. The price index for drugs grew steadily from the mid-1990s (ranging in growth from about 1% to 5% annually) before briefly declining around 2020. However, it increased by 2.7% between 2021 and 2022.

The growth in pharmaceutical product utilization between in 2022 (5.2%) was higher than the rates seen throughout much of the 2010s, though not as high as growth in 2019 and 2020. The COVID-19 pandemic had minimal impact on pharmaceutical utilization compared to most other health consumption metrics.

National health spending per capita increased modestly in 2022, though general economic price inflation spiked

Health spending per capita increased by 3.7% between 2021 and 2022. The personal consumption expenditure (PCE) price index (inflation) grew 6.5% in 2022, a major increase from previous years. Trends going forward may change. In 2022, prices for food, energy, and motor vehicles grew rapidly. It remains to be seen whether, or to what extent, rising prices in the rest of the economy may eventually affect health prices (or the converse). Thus far, healthcare price increases have not been inflated to the same degree. Since many provider payment contracts are set in advance, there is a lag time in health sector prices reflecting the inflation in labor, goods, and services.

The Peterson Center on Healthcare and KFF are partnering to monitor how well the U.S. healthcare system is performing in terms of quality and cost.

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