Growth of the health care industry has resulted in a higher proportion of GDP spent on health care, a larger workforce, and increased costs
IN THE LAST 60 YEARS, the proportion of the Gross Domestic Product (gdp) of the United States spent on health care has increased almost four-fold— from 5 percent of GDP in 1960 to 19.7 percent in 2020.
The record increase reflects multiple factors, including a growing and aging population, availability of new medical treatments and higher costs.
Between 2019 and 2020, U.S. health care spending grew to reach $4.1 trillion or $12,530 per person. The rapid one-year increase in spending was due to a 36 percent increase in federal health care spending in response to covid-19. That portion of federal spending included the Provider Relief Fund and the Paycheck Protection Program, as well as spending on public health.
Increase in workforce
The increase in resources devoted to health care is reflected in the workforce. The Census Bureau reports that there are 22 million workers in the health care industry (2019 data)—14 percent of all u.s. workers.
Employment in the health care workforce is projected to grow an additional 16 percent by 2030.
Revenue to fund the health care system comes from multiple sources. Private health insurance accounts for 28 percent; Medicare, 20 percent; and Medicaid, 16 percent. Out-of-pocket payment from patients, including co-payments and deductibles, make up 9 percent.
Hospitals receive the largest proportion of health care dollars (31 percent). Physicians and clinics combined receive 20 percent. Expenditures on prescription drugs are 8 percent.
Cost of insurance and prescription drugs
Families are feeling the pinch of added costs. According to a survey by the Kaiser Family Foundation, the average premium for an employer-sponsored family health insurance policy rose 4 percent in 2021 to more than $22,200 per year.
Another survey by Kaiser reported that the price of more than half of the drugs covered by Medicare in 2020 increased by more than the rate of inflation. Of the 25drugs accounting for the most spending under Part D, 23 of them had price increases that exceeded inflation.
A majority of both Democrats and Republicans surveyed by Kaiser said the government should do more to control drug prices.
A prosperous society may choose to devote an increasing proportion of resources to health care in order to promote quality and length of life after other basic needs have been met.
As the proportion of resources spent on of health care approaches 20 percent, the resources available for other societal needs will be increasingly constrained.
The Brookings Institution noted, “If health expenditures continue to increase as a share of government spending, the increase will eventually necessitate either tax increases or reduced spending on other important government functions like public safety, infrastructure, research and development, and education.”
The ongoing challenge will be to balance health care with other needs as well as to develop a more equitable distribution of health careresources. .