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February 24, 2016

Healthcare spending on the rise

The U.S. Census Bureau’s Quarterly Service Report compared expenditures for the first two quarters of 2014 and 2015 and found that expenditures for "health care and social assistance" rose by 6.7 percent. That’s up from an annual rate of spending increase of less than 4 percent from 2008 to 2013.

The increase in spending could be due to many factors, including a moderate level of economic recovery and more people covered by insurance under the Affordable Care Act. The proportion of the population without public or private health insurance in 2015 is 10.2 percent - down from a high of 18.2 percent in 2010.

Higher proportion of GDP spent on health care

According to the Centers for Medicare & Medicaid Services (CMS), national health care expenditures take up 17.2 percent of the gross domestic product. In 1990, it was 12.1 percent of GDP. Health expenditures per person in 2014 were $9,695. Health care spending in 2013 overall was $2.9 trillion. The largest single source of funds was private insurance (33 percent). Government health programs, when combined, constitute a larger portion of health care funding: Medicare (20 percent), Medicaid (16 percent), and other government health programs (7 percent).

Total US Expendisure

Health care spending

As the U.S. population ages and as more people are eligible for Medicaid under the Affordable Care Act, the size of government programs has increased. Between 1995 and 2014, the number of enrollees in Medicare increased by 44 percent, and the number of enrollees in Medicaid and the Children’s Health Insurance Program (CHIP) increased by 90 percent.

Medicare enrollment includes people age 65 and over as well as disabled people under age 65. In 2014, the number of Medicare enrollees age 65 and over was 45 million; the number of disabled people under age 65 was 9 million. Medicare also provides coverage for 512,000 people with end-stage renal disease (2013 data).

Hospitals receive the largest proportion of health care dollars - 32 percent. Physicians and clinics (combined) receive 20 percent. Expenditures on prescription drugs are at 9 percent.

The proportion of health care dollars going for prescription drugs is expected to rise with increasing use of specialty drugs. A report by Peterson-Kaiser Health System Tracker estimates that pharmaceutical spending increased by 12.6 percent in 2014.

Although hospitals receive the largest portion of health care dollars, the number of hospitals has decreased somewhat - from 6,522 nationwide in 1990 to 6,164 in 2013. During the same time period, the number of ambulatory surgical centers providing services to Medicare beneficiaries has increased more than four-fold. The number of hospices has grown five-fold.

Exceeding general inflation rate

Even during the years in which the rate of increase in health care spending slowed, the rate of increase still exceeded the general rate of inflation. (Since 2008, the Consumer Price Index (CPI) has risen by 3 percent or less per year. Between the end of 2013 and the end of 2014, the CPI rose only 0.8 percent.) The average annual increase in U.S. health care spending from 2008 to 2013 was 3.2 percent and is projected to rise in the coming years.

The proportion of resources devoted to health care cannot rise indefinitely. Health care is, of course, of vital importance - but so are defense, education and infrastructure. Advances in technology and efficiency should improve the quality of healthcare, but balancing healthcare with other needs also will have to take place.

Jeff Atkinson teaches health care law at DePaul University College of Law in Chicago.



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