Health in The United States - Spending

Spending

According to the World Health Organization (WHO), total health care spending in the U.S. was 15.2% of its GDP in 2008, the highest in the world. The Health and Human Services Department expects that the health share of GDP will continue its historical upward trend, reaching 19.5% of GDP by 2017. Of each dollar spent on health care in the United States, 31% goes to hospital care, 21% goes to physician/clinical services, 10% to pharmaceuticals, 4% to dental, 6% to nursing homes and 3% to home health care, 3% for other retail products, 3% for government public health activities, 7% to administrative costs, 7% to investment, and 6% to other professional services (physical therapists, optometrists, etc).

The Office of the Actuary (OACT) of the Centers for Medicare and Medicaid Services publishes data on total health care spending in the United States, including both historical levels and future projections. In 2007, the U.S. spent $2.26 trillion on health care, or $7,439 per person, up from $2.1 trillion, or $7,026 per capita, the previous year. Spending in 2006 represented 16% of GDP, an increase of 6.7% over 2004 spending. Growth in spending is projected to average 6.7% annually over the period 2007 through 2017.

In 2009, the United States federal, state and local governments, corporations and individuals, together spent $2.5 trillion, $8,047 per person, on health care. This amount represented 17.3% of the GDP, up from 16.2% in 2008. Health insurance costs are rising faster than wages or inflation, and medical causes were cited by about half of bankruptcy filers in the United States in 2001.

The Congressional Budget Office has found that "about half of all growth in health care spending in the past several decades was associated with changes in medical care made possible by advances in technology." Other factors included higher income levels, changes in insurance coverage, and rising prices. Hospitals and physician spending take the largest share of the health care dollar, while prescription drugs take about 10%. The use of prescription drugs is increasing among adults who have drug coverage.

One analysis of international spending levels in the year 2000 found that while the U.S. spends more on health care than other countries in the Organisation for Economic Co-operation and Development (OECD), the use of health care services in the U.S. is below the OECD median by most measures. The authors of the study concluded that the prices paid for health care services are much higher in the U.S. Economist Hans Sennholz has argued that the Medicare and Medicaid programs may be the main reason for rising health care costs in the U.S.

Health care spending in the United States is concentrated. An analysis of the 2008 and 2009 data by Agency for Healthcare Research and Quality (AHRQ) found that the 1% of the population with the highest spending accounted for 27% of aggregate health care spending. The highest-spending 5% of the population accounted for more than half of all spending. This reflects spending in 2009, as well. In both 2008 and 2009, the top 30 percent of the population ranked by expenditures accounted for nearly 89 percent of health care expenditures. Further, 50 percent of the population ranked by their expenditures accounted for only 3.1 percent and 2.9 percent of the total for 2008 and 2009. Relative to the overall population, those who remained in the top 10% of spenders between 2008 and 2009 were more likely to be in fair or poor health, elderly, female, non-Hispanic whites and those with public-only coverage. Those who remained in the bottom half of spenders were more likely to be in excellent health, children and young adults, men, Hispanics, and the uninsured. These patterns were stable through the 1970s and 1980s, and some data suggest that they may have been typical of the mid-to-early 20th century as well.

An earlier study by AHRQ the found significant persistence in the level of health care spending from year to year. Of the 1% of the population with the highest health care spending in 2002, 24.3% maintained their ranking in the top 1% in 2003. Of the 5% with the highest spending in 2002, 34% maintained that ranking in 2003. Individuals over age 45 were disproportionately represented among those who were in the top decile of spending for both years.

Seniors spend, on average, far more on health care costs than either working-age adults or children. The pattern of spending by age was stable for most ages from 1987 through 2004, with the exception of spending for seniors age 85 and over. Spending for this group grew less rapidly than that of other groups over this period.

The 2008 edition of the Dartmouth Atlas of Health Care found that providing Medicare beneficiaries with severe chronic illnesses with more intense health care in the last two years of life—increased spending, more tests, more procedures and longer hospital stays—is not associated with better patient outcomes. There are significant geographic variations in the level of care provided to chronically ill patients, only 4% of which are explained by differences in the number of severely ill people in an area. Most of the differences are explained by differences in the amount of "supply-sensitive" care available in an area. Acute hospital care accounts for over half (55%) of the spending for Medicare beneficiaries in the last two years of life, and differences in the volume of services provided is more significant than differences in price. The researchers found no evidence of "substitution" of care, where increased use of hospital care would reduce outpatient spending (or vice versa).

Increased spending on disease prevention is often suggested as a way of reducing health care spending. Whether prevention saves or costs money depends on the intervention. Childhood vaccinations, or contraceptives save much more than they cost. Research suggests that in many cases prevention does not produce significant long-term cost savings. Some interventions may be cost-effective by providing health benefits, while others are not cost-effective. Preventive care is typically provided to many people who would never become ill, and for those who would have become ill is partially offset by the health care costs during additional years of life.

In September 2008 The Wall Street Journal reported that consumers were reducing their health care spending in response to the current economic slow-down. Both the number of prescriptions filled and the number of office visits dropped between 2007 and 2008. In one survey, 22% of consumers reported going to the doctor less often, and 11% reported buying fewer prescription drugs.

In 2009, the average private room in a nursing home cost $219 daily. Assisted living costs averaged $3,131 monthly. Home health aides averaged $21 per hour. Adult day care services averaged $67 daily.