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CHCF Report on Spending

By October 29, 2012Commentary

American health spending is exhaustively analyzed, sliced and diced, likely because the continued growth of this spending affects individuals and governments more than perhaps any other category of expenses.  Several reports have been issued over the last few weeks on this topic and in our next few posts we will excerpt some of the findings in these reports.  Today we look at a report from the California HealthCare Foundation which reviews spending up to 2010, and notes trends in various categories of spending and in who is paying for these categories.   (CHCF Report)   Spending in 2010 was $2.6 trillion or $8402 per person.  The increase from 2009 to 2010 was 3.9%, about the same as the 2008 to 2009 increase of 3.8%.  Spending growth is expected to accelerate to 7.4% in 2013.  Spending has grown almost 100 times what it was 50 years ago at $27 billion in 1960.  Federal spending has grown most dramatically, with the federal government now paying 29% of the total and Medicaid and Medicare consuming almost 23% of the federal budget.    Spending on personal health services is 84% of the total, with the remainder being investment (buildings, etc.), the net cost of health insurance (administrative costs and profit), and public health.  Of the 84%, almost 40% is hospital spending and about a quarter is physician costs.

During the 20 years from 1990 to 2010, spending grew at an annual rate of 6.6%.  Hospital care costs grew at 6.1% annually, as did physician costs, while drugs rose 9.8% a year.  While household contributions accounted for 28% of the total payments for all that $2.6 trillion in spending, primarily through premium sharing and out-of-pocket costs, the percent of that spending borne by households has actually gradually declined as the proportion borne by the federal government has risen.  The share carried by private business has also declined.  On current trends, household and private insurance spending as a percent of the total will continue to decline while government’s share ramps up, largely due to the ACPPA.  The payer contribution varies by category of care.  For example, Medicare pays proportionately more of hospital costs, while private insurance pays more of physician ones.  Consumer pay a lot of the cost of dental care.  Consumers also pay a fair amount of  drug costs.  Health spending continues to outpace inflation by two or more percent and GDP by a smaller margin.  Hospital care is expected to have the highest grow rates going forward and drugs the lowest.

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