Spending in health care
"National Health Expenditures" is the official name for how much the U.S. spends on health care. The National Health Statistics group at the Centers for Medicare and Medicaid Services (CMS) is responsible for updating the annual estimates of the level of and growth in health spending. In 2014, the last year for which data are available, national health expenditures amounted to $3,031.3 billion dollars or $9,523 on a per capita basis.
Recent trends in national health expenditures
In 2014, health expenditures grew by 5.3 percent. In comparison, spending grew by 2.9 percent in 2013 and by an average of 4.0 percent per year over the five-year period from 2007 to 2012. Despite the uptick, the 5.3 percent growth rate is still low by historical standards. In addition to the recent period, there have been only five other years since 1961 when health spending grew by less than 6 percent (each of the years from 1994 through 1998). In only one of them was the growth rate lower than that for 2014 (5.2 percent in 1996). Important factors behind the acceleration in growth include the coverage expansions of Affordable Care Act as well as the introduction of new drug treatments for hepatitis C, cancer, and multiple sclerosis. Learn more about health spending in the charts below. AMA members can access the full report on health spending here.
Where does it go?
Health expenditures include those made for personal health care as well expenditures for other items such as government administration, the net cost of health insurance, government public health activities, and investment. The chart below shows where the U.S. health care dollar went in 2014. For personal health care only the largest categories are shown. Physician and clinical spending—the second largest personal health care category—is split into its two components. 15.9 percent of the healthcare dollar was spent on physician services, about half that spent on hospital care (32.1 percent). 9.8 percent was spent on prescription drugs.
"Nursing care facilities" includes freestanding facilities only. It also includes spending on continuing care retirement communities, state and local government nursing facilities, and Department of Veterans Affairs nursing facilities.
"Other personal health care" includes spending on other professional services, dental services, durable medical equipment, other non-durable medical products, residential care facilities, ambulance providers, medical care provided in non-traditional settings, and expenditures for Home and Community Based Waiver programs under Medicaid.
"Government administration" includes all administrative costs associated with insuring individuals enrolled in health insurance programs.
"Net cost of health insurance" is the difference between current year premiums and benefits paid for private health insurance including companies that insure enrollees of: Medicare, Medicaid, CHIP, and the health portion of workers' compensation.
Growth in personal spending
Over the last 10 years, spending on physician services has grown more slowly than spending in the other large categories of personal health care. Physician spending grew by an average of 4.1 percent per year between 2004 and 2014. In comparison, hospital spending and prescription drug spending grew by 5.6 percent and 4.4 percent. Clinical spending, which is often reported with physician spending, also grew more quickly than physician spending, at an average rate of 6.1 percent per year over that period.
Maximizing value in the health care system February 2015
The AMA is engaged in a number of efforts that have the potential to reduce the rate of growth in health care spending. One spending contributor is administrative costs. Through its advocacy, the AMA works to reduce administrative burdens and increase efficiency in physician practices. For example, we support the creation and adoption of standard electronic transactions through our participation in standards development organizations, such as the Accredited Standards Committee (ASC) X12N Insurance Subcommittee and the National Council for Prescription Drug Programs (NCPDP). We also represent physicians’ interests on this topic via testimony before the National Committee on Vital and Health Statistics (NCVHS) Subcommittee on Standards, an advisory body that makes recommendations to the HHS Secretary regarding the standards transactions.
Another spending contributor is, of course, the burden of disease. For example, the cost of prediabetes reached $44 billion in 2012. People with prediabetes can prevent or delay the onset of diabetes through structured lifestyle modifications such as participation in an evidence-based Diabetes Prevention Program (DPP). Successful participation, in turn, will help mitigate the economic burdens associated with the disease. Working with the National Center for Chronic Disease Prevention and Health Promotion, the AMA encourages physicians to screen and refer individuals with prediabetes to evidence-based DPPs focused on lifestyle modifications.