Health spending in the U.S. increased by 3.9% in 2017 to $3.5 trillion or $10,739 per capita. This growth rate is lower than what was observed in 2016 (4.8 percent) and 2015 (5.8 percent). After a period of relatively fast growth in 2014 and 2015 during the implementation of the Affordable Care Act, 2017 was characterized by slower growth that continued from 2016. In fact, growth in 2017 was similar to the 3.7 percent average annual rate of the 5-year period ending in 2013. These growth rates are the lowest since the early 1960s when health spending was first tracked in its current format.
Policy research perspective
A new AMA Policy Research Perspective provides an in-depth look at U.S. health spending in 2016.
Health care spending explained
The United States spent $3,492.1 billion on health care in 2017.
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: this is the difference between health insurance expenditures and benefits incurred and includes administrative costs, additions to reserves, rate credits and dividends, premium taxes and fees, and net underwriting gains or losses
- 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 3.8% per year between 2007 and 2017.
In comparison, spending on hospital services grew by 5.1%. 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. Prescription drugs spending had an average annual growth rate of 3.5%. Although this is similar to that of physician spending, growth in prescription drug spending was the most erratic of the large spending categories; while it fell to near 0% in 2010, 2012, and 2017, it also spiked to 12.4% in 2014.
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 administrative burdens to decrease practice costs.
- Working to improve and reform 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, maintenance and adoption of standard electronic transactions. The AMA is an active participant in standard development organizations, such as the X12N Insurance Subcommittee, National Council for Prescription Drug Programs (NCPDP) and Health Level 7 International (HL7).
- Supporting physicians’ interests in reducing administrative burden through advocacy to appropriate agencies and policymakers, including 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 increase physicians’ awareness of and referrals to the CDC-recognized lifestyle change program to mitigate the burdens associated with prediabetes^.
*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.
^Source: Nhim, Kunthea, Tamkeen Khan, Stephanie M. Gruss, Gregory D. Wozniak, Kate Kirley, Patricia Schumacher, Elizabeth Luman and Ann Albright. Primary Care Providers’ Behaviors toward Screening, Testing, and Referring Patients with Prediabetes to CDC’s National Diabetes Prevention Program. American Journal of Preventative Medicine.
Previous policy research perspectives
- Policy research perspectives: national health expenditures, 2016: Annual spending growth on the downswing (PDF)
- Policy research perspectives: national health expenditures, 2015: annual spending growth at its highest rate since 2007 (PDF)
- Policy research perspectives: national health expenditures, 2014: spending grows by more than 5% for first time since 2007 (PDF, Members only)
- Policy research perspectives: national health expenditures, 2013: another year, another record low for growth (PDF, Members only)
- Policy research perspectives: what's behind the recent spending slowdown? An overview of literature that tries to explain it (PDF, Members only)
- Policy research perspectives: perspectives on the recent slowdown In health spending growth (PDF, Members only)
- Policy research perspectives: national health expenditures, 2010: slow growth continues (PDF, Members only)
- Policy research perspectives: national health expenditures: what do they measure? What’s new about them? What are the trends? (PDF, Members only)