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Trends in Health Care Spending

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Spending in health care increased by 5.8% in 2015, the last year for which data are available. This represents an increase from the 5.3% growth in 2014 and the 3.7% average annual increase over the 5-year period from 2008–2013.

Although the 2015 growth rate is the highest single year growth rate in spending since 2007 (6.5%), it is still low from a historical perspective. Going back to the early 1960s when health spending data was first collected in its current format, there are only a handful of years in the mid-1990s when spending grew more slowly than it did in 2015.

As in 2014, spending growth in 2015 was affected by coverage expansions resulting from the Affordable Care Act that increased the use and intensity of health care services.

Policy Research Perspective

A new AMA Policy Research Perspective provides an in-depth look at U.S. health spending in 2015.

Health Care Spending Explained

The United States spent $3,205.6 billion on health care in 2015.

This spending can be broken down into the following categories:

  • Hospital care
  • Physician services
  • Clinical services
  • Prescription drugs
  • Nursing care facilities
  • Home health care
  • Other personal health care costs
  • Government administration: includes all administrative costs associated with insuring individuals in health insurance programs
  • Net cost of health insurance: the difference between current year premiums and benefits paid for private health insurance companies that insure enrollees of Medicare, Medicaid, CHIP and the health portion of workers’ compensation
  • Government public health activities
  • Investment spending

Slow Growth for Physician Services

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 3.9% per year between 2005 and 2015.

In comparison, spending on hospital services and prescription drugs grew by 5.5% and 4.7%, respectively. Clinical spending, which is often reported with physician spending, also grew more quickly than physician spending, at an average rate of 6.2% per year over that period.

Reducing the Growth of Spending

The AMA is engaged in a number of efforts that have the potential to further reduce the rate of growth in health care costs:

Reducing practice burdens to decrease administrative costs.

  • Working to reduce manual, burdensome processes, such as prior authorization, and increase efficiency in physician practices to help reduce administrative costs in health care spending.
  • Supporting the creation and adoption of standard electronic transactions. The AMA is an active participant in standard development organizations, such as the Accredited Standards Committee, X12N Insurance Subcommittee and the National Council for Prescription Drug Programs.
  • Supporting physicians’ interests in reducing administrative burden via testimony before the National Committee on Vital and Health Statistics Subcommittee on Standards, an advisory body that makes recommendations to the HHS Secretary regarding the standard transactions.

Promoting participation in evidence based lifestyle modification programs such as the National Diabetes Prevention Program (DPP) to reduce or delay the onset of diabetes among those with prediabetes.

  • AMA research shows that lifestyle modifications can reduce annual health care costs by nearly $2,700 per participant and have a 3 year ROI as high as 42%*. Use the AMA Diabetes Prevention Program Cost Savings Calculator to determine potential savings for your organization.
  • The AMA is working with the Centers for Disease Control and Prevention to encourage physicians to screen and refer individuals with prediabetes to evidence-based DPPs focused on lifestyle modifications. Find out more information.

* source: Khan, Tamkeen, Stavros Tsipas and Gregory D. Wozniak.  Medical Care Expenditures for Individuals with Prediabetes: The Potential Cost Savings in Reducing the Risk of Developing Diabetes. Population Health Management.

Previous Policy Research Perspectives

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