Healthcare spending in the United States surpassed $3.4 trillion in 2016. Many Americans have preconceptions about how this 19% of our GDP is spent.
The Center for Medicare and Medicaid Services, Office of the Actuary, publishes the U.S. national healthcare expenditure projections annually. Figure 1 below summarizes all our historical healthcare spending since 2008, as well as projected spending through 2024.
Figure 1 – Total U.S. Healthcare Expenditures by Service 2008 – 2024
For the year 2016, the top U.S. healthcare expense categories by % of overall spend were:
- 32% Hospital Care
- 26% Professional Services
- 20% Physicians
- 4% Dentists
- 3% All Other Healthcare Professionals
- 13% Retail Medical Products
- 10% Prescription Drugs
- 3% All Other Medical Products
- 8% Residential and Personal Care
- 7% Private Health Insurance Administration
- 5% Nursing Care Facilities and Continuing Care Retirement Communities
- 2.7% Home Healthcare
- 2.5% Government Public Health Activities
- 1.3% Government Administration
- 1.4% Research
So, how does the actual mix of U.S. healthcare expenses compare to your preconceptions? Many Americans incorrectly believe that long-term nursing home services and end-of-life care are the primary drivers of escalating healthcare costs in the United States. All nursing facility care only makes up 5% of overall U.S. healthcare costs.
Many Americans also believe that greedy drug companies and insurance companies are major drivers of U.S. healthcare costs. All prescription drugs only comprise 10% of total U.S. healthcare expenses, while all private insurance costs only make up 7%.
Analyzing total U.S. healthcare expenses on this basis alone is too narrow to gain any meaningful insight. We must also consider how our $3.4 trillion dollars is spent on various medical diseases, treatments, and patient demographics that transcend all the different types of healthcare organizations and professionals. For example, spending on cardiovascular disease transcends different spending categories, including physician services, pharmaceuticals, and hospital services.
Yet, we cannot ignore that total U.S. healthcare expenses are projected to grow 59% over the next nine year period, with substantial growth for every category identified by the Office of the Actuary.
The projected expense growth % by category for 2016 through 2024 is:
- 61% Hospital care
- 55% Professional Services
- 55% Physician and Clinical Services
- 62% Other Professional Services
- 49% Dental Services
- 50% Other Health, Residential, and Personal Care
- 70% Home Health Care
- 56% Nursing Care Facilities and Continuing Care
- Retirement Communities
- 63% Retail Outlet Sales of Medical Products
- 64% Prescription Drugs
- 58% Other Medical Products
- 81% Government Administration
- 63% Net Cost of Private Health Insurance
- 60% Government Public Health Activities
- 56% Investment
- 48% Research
- 60% Structures & Equipment
From a growth standpoint, there is hardly a bad sub-sector within the healthcare industry. You can’t do worse than 5% annual growth in any category.