Health care spending now nearly one-fifth of the U.S. economy

By Anne B. Martin, Micah Hartman, Benjamin Washington, Aaron Catlin, and The National Health Expenditure Accounts Team
Health Affairs, December 6, 2018 (Published Ahead of Print)

Abstract

Total nominal US health care spending increased 3.9 percent to $3.5 trillion in 2017, slowing from growth of 4.8 percent in 2016. The rate of growth in 2017 was similar to the increases between 2008 and 2013, which preceded the faster growth experienced during 2014–15—a period that was marked by insurance coverage expansion and large increases in prescription drug spending. Slower growth in health care spending in 2017 was mainly attributable to the use and intensity of goods and services, particularly for hospital care, physician and clinical services, and retail prescription drugs. Nearly all major sources of insurance and sponsors of health care experienced slower growth in 2017. On a per capita basis, spending on health care increased 3.2 percent and reached $10,739 in 2017. The share of gross domestic product devoted to health care spending was 17.9 percent in 2017, similar to the share in 2016.

Conclusion

Health care spending grew 3.9 percent in 2017, about the same rate at which the overall economy increased, and as these two growth rates converged, the health spending share of GDP stabilized. This was the first year since 2013 that this share did not increase, as 2014 and 2015 were marked by insurance coverage expansion and expensive new drug treatments that produced faster growth in health care spending, while 2016 was affected by low economic growth.

Viewed from a longer historical perspective, the rate of growth in health spending over the past decade contrasts with the experience of the prior ten-year period. Health care spending growth averaged 4.3 percent per year during 2008–17, compared to an average annual rate of 7.3 percent over the 1998–2007 period. For this most recent decade, growth in both excess medical-specific inflation and the use and intensity of health care goods and services was slow relative to historical trends, despite the fact that this period included the largest increase in health insurance coverage since the 1960s.

However, the past ten years were also marked by lower overall economic growth (which averaged 3.0 percent) and lower economywide inflation (which averaged 1.6 percent), both strongly influenced by the Great Recession. As a result, the health spending share of GDP increased by 1.6 percentage points from 2008 to 2017 (compared to a 2.6-percentage-point increase from 1998 to 2007). For a health sector that now accounts for nearly one-fifth of the US economy, future increases in health care expenditures will likely lead to policy decisions focused on affordability and sustainability.

https://www.healthaffairs.org…

Comment:

By Don McCanne, M.D.

Health spending continues to gradually increase as a share of our gross domestic product – 1.6 percent over the past decade (though lower than the 2.6 percent increase over the previous decade). The authors state, “For a health sector that now accounts for nearly one-fifth of the US economy, future increases in health care expenditures will likely lead to policy decisions focused on affordability and sustainability.”

Those policy decisions should also address the high rates of uninsurance, underinsurance, administrative waste due to our financing model heavily dependent on a multitude of private insurers, and barriers to beneficial health care services due to restrictions of insurer provider networks and excessive deductibles and other cost sharing.

Most of these problems can be resolved simply by enactment of a single legislative package: Single Payer Medicare for All. Let’s do it.

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