How US Spending on Healthcare Has Changed Over Time

Jaime Rosenberg

Total US health spending has increased significantly since 1970, while out-of-pocket spending now accounts for less of total health expenditures, according to analyses published by the Peterson-Kaiser Health System Tracker.

Using National Health Expenditure Data from CMS, the partnership between Peterson Center on Healthcare and Kaiser Family Foundation focused on how health spending has changed over time, as well as the driving forces behind the spending growth.

When looking at health services spending quarterly, data showed that growth has slowed in recent quarters. The 2 most recent quarters of 2017 with data, Q2 and Q3, brought a slower growth in spending on health services than in recent years, increasing from 3.2% to 4.5%. Overall, health services spending growth has increased from 2.9% in Q1 of 2010 to 4.5% in Q3 of 2017.

Meanwhile, total health expenditures have increased significantly over the past several decades. These expenditures include healthcare and health-related activities such as administration of insurance, health research, and public health. In 1970, health spending accounted for $74.6 billion in spending; by 2000, health expenditures accounted for approximately $1.4 trillion, and in 2016 the figure doubled, accounting for more than $3.3 trillion.

Similarly, health spending has grown substantially on a per capita basis, increasing nearly 29-fold over the last 4 decades. In 2016, per capita spending was $10,348, up from $355 in 1970. In constant 2016 dollars, the increase was almost 6-fold, increasing from $1762 in 1970 to $10,348 in 2016.

Researchers also took a look at what proportion of the economy is devoted to health. In 1970, the US spent 6.9% of its gross domestic product (GDP) on total health spending through both private and public funds. In 2016, the amount increased to 17.9% of the GDP.

Throughout the period studied, health spending growth has continually outpaced the growth of the economy. From 1970 to 1980, the average annual growth of the economy was 9.2%, compared with health spending growth of 12.2%. However, in recent years, the margin has decreased. From 2010 to 2013, the average annual growth rate in health spending (3.6%) was similar to growth in GDP (2.9%).

Although out-of-pocket spending is higher per person than it was in 1970, it makes up a smaller share of total health expenditures; in 1970, out-of-pocket costs accounted for 34% of national health expenditures, compared with 10% in 2016. While out-of-pocket costs per capita have continued to rise, the majority of the growth is attributed to insurance coverage, particularly from public programs. Private insurance expenditures represented 34% of total health spending in 2016, up from 21% in 1970, and public insurance represented 41% of total health spending in 2016, up from 22% in 1970.

Health service spending is typically a result of prices, such as the amount charged for a hospital stay, and utilization, such as the number of hospital stays. Throughout the 1980s and 1990s, healthcare price growth outpaced growth in utilization. However, price growth slowed in the 2000s, and following the recession, utilization became the dominant driver as price growth continued to fall. The emergence of utilization as the primary cause of health services spending can likely be attributed to coverage gains under the Affordable Care Act, according to the researchers.
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