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Analysis of US Health Spending

By July 19, 2011Commentary

The National Institute for Health Care Management Foundation issued its analysis of national health care spending in 2009.  Total expenditures were about $2.5 trillion, or $8,086 per person.  Partly due to the recession, 17.6% of GDP went to health care, as health costs stayed the same or grew while the overall economy declined.  About $6800 per person was spent on personal health care services, including $2500 for hospital, $1600 for physicians and related services, $1100 for drugs, DME and other equipment, $1100 for home health and long term care and $550 for dentists and other non-physician health professionals.  The remaining 16% of total health care expenses included the net costs of private insurance, administrative costs of public insurance programs, public health programs and government investments in research, buildings and equipment.   (NIHCM Report)

About half the population accounts for only 3% of spending, but almost 50% of total expenditures go for 5% of the population.  In 2008, the lowest 50% of the population had mean annual spending of $233, while the top 1% cost an average of $76,476.  Older people predominate in the high spending group as did those who rated their health poor or fair, and obviously the presence of chronic conditions had a large influence on spending.  Interestingly, there is not as much persistence in high spending from year-to-year as might be suspected.  From 2007 to 2008, for example, only 18% of people in the top 1% stayed there, for the top 5% the number was 31% and for the top 10%, 43%.   This suggests that strategies aimed at managing high-cost patients can’t rely on spending in any one year as a marker for identifying future years’ high cost patients.

In per capita terms, spending grew over 18% in the five years from 2005 to 2009.  Hospital spending increased by 21%, a third of total growth.  Public health spending grew by 32%.   Private health insurance premiums increased by about 15% in this period.  The component of health insurance premiums dedicated to paying for enrollees’ health services was about 89%, the remaining 11% was the net cost of insurance, which actually declined over this time period.  Hospital spending was also the largest contributor to premium growth.  Unit price increases were far more important than utilization growth in explaining overall spending rises.   Somewhere between 60% to 75% of spending growth is attributable to price increases.  This brief compiles a number of very interesting statistics, helping to understand where our health dollars are going.


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