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Trends in Health Care Spending

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Spending in health care increased by 5.3% in 2014, the last year for which data are available. This represents an increase from the 2.9% growth in 2013 and the 4.0% average annual increase over the 5-year period from 2007–2012.

This increase in spending can be attributed to the implementation of the Affordable Care Act and introduction of new drug treatments for hepatitis C, cancer and multiple sclerosis.

The recent growth rate is still considered to be low by historical standards.

View the full Policy Research Perspective on trends in health spending (PDF, members only).

What Health Care Spending Pays for

The United States spent $3,031.3 billion on health care in 2014.

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 in Spending on 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 4.1% per year between 2004 and 2014.

In comparison, spending on hospital services and prescription drugs grew by 5.6% and 4.4%, respectively. Clinical spending, which is often reported with physician spending, also grew more quickly than physician spending, at an average rate of 6.1% per year over that period.

The AMA's Efforts to Reduce Health Care Spending Growth Rates

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

  1. Reducing administrative burdens to decrease administrative costs.

    • Working to reduce administrative burdens 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 standards transactions.
  2. Preventing and reducing prediabetes to decreases the cost of disease.
    • The cost of prediabetes reached $44 billion in 2012. The onset of diabetes can be prevented or delayed through structured lifestyle modifications, such as Diabetes Prevention Program (DPP).
    • The AMA is working with the National Center for Chronic Disease Prevention and Health Promotion to encourage physicians to screen and refer individuals with prediabetes to evidence-based DPPs focused on lifestyle modifications. Find testing information.

Previous Policy Research Perspectives on Health Spending

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