Healthcare spending in the United States is projected to surpass $3.67 trillion in 2018. Many Americans have preconceptions about how this 19.5% of our GDP will be 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 2010, as well as projected spending through 2026.
Figure 1 – Total U.S. Healthcare Expenditures by Service 2010 – 2026
For the year 2018, the top U.S. healthcare expense categories by % of overall spend are projected to be:
- 32.4% Hospital Care
- 26.4% Professional Services
- 20.0% Physicians
- 3.7% Dentists
- 2.8% All Other Healthcare Professionals
- 13.2% Retail Medical Products
- 9.8% Prescription Drugs
- 3.4% All Other Medical Products
- 5.2% Residential and Personal Care
- 7.0% Private Health Insurance Administration
- 4.8% Nursing Care Facilities and Continuing Care Retirement Communities
- 2.8% Home Healthcare
- 2.4% 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 $3.67 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 55% 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 2018 through 2026 is:
- 55% Hospital care
- 50% Professional Services
- 51% Physician and Clinical Services
- 53% Other Professional Services
- 43% Dental Services
- 57% Other Health, Residential, and Personal Care
- 68% Home Health Care
- 49% Nursing Care Facilities and Continuing Care Retirement Communities
- 64% Retail Outlet Sales of Medical Products
- 68% Prescription Drugs
- 54% Other Medical Products
- 69% Government Administration
- 59% Net Cost of Private Health Insurance
- 27% Government Public Health Activities
- 51% Investment
- 48% Research
- 53% 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.