Health care spending

Health care spending: The United States spends $4 trillion on health care each year, yet many still lack access to high-quality, affordable care. Targeted interventions can help, according to the AAMC Research and Action Institute. 

Last week, Congress passed historic legislation to fight inflation, reduce carbon emissions, and invest in domestic energy production. But the Inflation Reduction Act of 2022 also contains several health care provisions, including ones that will cut Medicare drug costs by an estimated $287 billion over 10 years and lower Affordable Care Act premiums for three years.

Inflation Reduction Act becomes law: How it will affect your health care

That’s good news for millions of individual patients and their families.

Much more will need to be done, though, if we are to truly rein in the astronomical cost of health care in the United States, which topped $4 trillion in 2020.

What do we get for our $4 trillion?

It’s worth noting that people across the globe — including many world leaders — come to the United States every year for high-quality health care. At the same time, the public health outcomes of some of our most vulnerable citizens remain dismal. The United States ranks 31st in life expectancy at birth, with high rates of maternal and infant mortality, obesity, heart disease, and HIV/AIDS, among other illnesses.

How the Inflation Reduction Act Will Reduce Health Care Costs for Seniors

Some point to these poor outcomes, as well as the fact that the United States spends roughly twice as much per capita as other wealthier nations on clinical care ($11,945 per person in 2020, compared with $5,268 in the U.K., $5,564 in France, and $6,731 in Germany), to suggest that the U.S. has a “health care spending problem.

But suggesting that we simply “spend less” fails to consider the complexity of the U.S. health care financing and delivery system — a system that includes both private and public insurance, a high degree of patient choice in providers and hospitals, and a cultural mandate to care for anyone who walks through the doors, regardless of ability to pay. All of these add to costs in ways different than in any other nation, as does the relatively high cost of labor.

Health care spending continues to decades-long rise

To wrap our arms around this problem, we at the AAMC Research and Action Institute are publishing three papers examining U.S. health care costs in all their complexity. Not surprisingly, no one factor is to blame for the high cost of care, but unique features of the American system contribute. For one, the United States spends more on clinical care but less on social services for families than many similar countries, despite higher rates of poverty. Furthermore, the United States is the only developed country that does not provide a basic health care plan for all residents. As a result, 27 million nonelderly people were uninsured in 2020.

What Is Driving Health Care Spending Upward In States With Cost Growth Targets?

The United States also spends an extraordinary amount on administrative costs, including billing and insurance, and through inefficient cross-subsidies to make up for government underpayments. While Medicare and Medicaid pay pre-negotiated fees for health care goods and services (though not, until this point, for drugs), these fees do not cover actual costs — Medicare covered 84% of average hospital costs, while Medicaid covered 88% in 2020 — leading providers to charge several times over for privately insured patients in an attempt to recoup their fees. All this negotiation between doctors and hospitals and dozens of different insurance companies costs money — and drives up the cost of care for everyone.

None of these cost drivers is going to be fixed in the near term. And frankly, the American public isn’t nearly as worried about them as they are about their out-of-pocket health care costs.

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Today, nearly one in five Americans have medical debt, and out-of-pocket spending for health care has doubled in the past 20 years, from $193.5 billion in 2000 to $388.6 billion in 2020. These rising costs have disproportionately fallen on those with the fewest resources, including uninsured people, Black people, Hispanic people, and families with low incomes. But even solidly middle-class families have been forced to make difficult health care decisions, due to increased cost sharing through copays and coinsurance.

So what’s the solution? In the short term, policymakers should provide targeted subsidies to specific populations, such as families whose household incomes fall outside the average or whose health care expenses are extraordinary. These subsidies — such as those included in the Inflation Reduction Act — might increase total health care spending in the short term but would provide tremendous benefit in the long term as patients may be more likely to seek preventive care.

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We also need to pursue thoughtful and targeted policies that will decrease out-of-pocket costs for patients, as well as those that will improve outcomes, including better health promotion and disease prevention. And we need to focus on getting more for our health care dollars while helping those who suffer from poor health and lack of access to care.

We may not be able to reduce overall health care costs significantly as a nation, but we can cut costs for families, reduce growth in costs, and, hopefully, improve health at the same time.

NHE Fact Sheet – CMS

https://www.cms.gov › NationalHealthExpendData › N

6 days ago — National health spending is projected to grow at an average annual rate of 5.4 percent for 2019-28 and to reach $6.2 trillion by 2028. Because 

Trends in health care spending – American Medical Association

https://www.ama-assn.org › about › research › trends-h

Health spending in the U.S. increased by 9.7% in 2020 to $4.1 trillion or $12,530 per capita. This growth rate is substantially higher than 2019 (4.3 .

FastStats – Health Expenditures – CDC

https://www.cdc.gov › nchs › fastats › health-expenditu

Per capita national health expenditures: $11,172 (2018); Total national health expenditures: $3.6 trillion (2018); Total national health expenditures as a 

National Health Care Spending In 2020: Growth Driven By 

https://www.healthaffairs.org › doi › hlthaff.2021.01763

by M Hartman · 2022 · Cited by 19 — US health care spending increased 9.7 percent to reach $4.1 trillion in 2020, a much faster rate than the 4.3 percent increase seen in 2019.

Infographic — US Health Care Spending: Who Pays?

https://www.chcf.org › Publications

Jun 29, 2022 — Between 1960 and 2020, there have been major shifts in who pays for hospital care, physician services, long-term care, prescription drugs, 

Top stories

President Joe Biden signs major climate, health care and tax bill into law

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Biden to sign major climate and health care spending bill

How does health spending in the U.S. compare to other … – KFF

https://www.kff.org › slideshow › health-spending-in-th

Jan 21, 2022 — The data through 2020 shows that the U.S. spends significantly more on health care than other nations, both on a per-capita basis and relative 

Health Care Expenditures per Capita by State of Residence

https://www.kff.org › other › state-indicator › health-sp

Health Spending Per Capita includes spending for all privately and publicly funded personal health care services and products (hospital care, 

Health resources – Health spending – OECD Data

https://data.oecd.org › healthres › health-spending

Health spending measures the final consumption of health care goods and services.

How has U.S. spending on healthcare changed over time?

https://www.healthsystemtracker.org › chart-collection

Feb 25, 2022 — By 2000, health expenditures had reached about $1.4 trillion, and in 2020 the amount spent on health tripled to $4.1 trillion. Health spending 

Current health expenditure (% of GDP) – World Bank Data

https://data.worldbank.org › SH.XPD.CHEX.GD.ZS

World Health Organization Global Health Expenditure database ( apps.who.int/nha/database ). The data was retrieved on January 30, 2022. LineBarMap.

Health Care Spending in the United States and Other High 

https://jamanetwork.com › journals › jama › fullarticle

by I Papanicolas · 2018 · Cited by 1159 — Findings In 2016, the US spent 17.8% of its gross domestic product on health care, and spending in the other countries ranged from 9.6% ( 

Reducing Health Care Spending: What Tools Can States 

https://www.commonwealthfund.org › fund-reports › aug

Aug 18, 2021 — These are services that offer patients with certain clinical presentations no benefit, or benefit less than cost, leading to unnecessary 

Why U.S. Healthcare Spending Is Rising so Fast – Investopedia

https://www.investopedia.com › u-s-healthcare-spendin

Currently, U.S. healthcare costs are growing 1.1% faster than the annual GDP is.2 · By 2028 U.S. healthcare spending will reach $6.2 trillion and account for 

Federal Health Care Spending | U.S. GAO

https://www.gao.gov › federal-health-care-spending

Similarly, federal Medicaid spending (also on the High Risk List) is expected to total $700 billion by 2030. Federal Spending on Major Health Care Programs 

Health Care | Congressional Budet Office

https://www.cbo.gov › topics › health-care

PROJECTIONS FOR MAJOR HEALTH CARE PROGRAMS FOR FY 2022 … In CBO and JCT’s projections, net federal subsidies in 2022 for insured people under age 65 are $997 

Health expenditures in the U.S. – statistics & facts – Statista

https://www.statista.com › topics › health-expenditures-i

Jan 18, 2022 — The United States spends more on health care than any other country. Annual health expenditures stood at over four trillion U.S. dollars in 

Health Care Spending in the United States and PubMed

https://pubmed.ncbi.nlm.nih.gov › 

by I Papanicolas · 2018 · Cited by 1159 — Findings: In 2016, the US spent 17.8% of its gross domestic product on health care, and spending in the other countries ranged from 9.6% ( 

Spending – MACPAC

https://www.macpac.gov › medicaid-101 › spending

Between CYs 1970 and 2019, total U.S. health care spending increased from 6.9 percent of gross domestic product (GDP) to 17.6 percent; over the same period, 

 

 

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