USA health care spending increased at a faster rate than inflation in 2012, yet again; increasing 3.7%. Total health expenditures reached $2.8 trillion, which translates to $8,915 per person or 17.2% of the nation’s Gross Domestic Product (GDP).
The GDP is calculated was adjusted in 2013 and the data series going back in time was adjusted. These changes resulted in increasing historical GDP values and making the portion of GDP for health care to decline (for example in 2011 using the old calculation health care was 17.9% of GDP and now 2011 is shown as health care spending representing 17.3% of GDP).
While health care spending increased faster than inflation yet again, the economy actually grew at a higher rate than health care spending grew. That the spending on health care actually declined as a percentage of GDP is good news; and it may even be that this hasn’t happened for decades (I am not sure but I think that might be the case).
Still health care spending growing above the rate of inflation is bad news and something that has to change. We have to start addressing the massive excessive costs for health care in the USA versus the rest of the world. The broken USA health care system costs twice as much as other rich countries for worse results. And those are just the direct accounting costs – not the costs of millions without preventative health care, sleepness nights worrying about caring for sick children without health coverage, millions of hours spent on completing forms to try and comply with the requirements of the health care system’s endless demand for paperwork, lives crippled by health care bankruptcies…
Health Spending by Type of Service or Product: Personal Health Care
- Hospital Care: Hospital spending increased 4.9% to $882 billion in 2012.
- Physician and Clinical Services: Spending on physician and clinical services increased 4.6% in 2012 to $565 billion.
- Other Professional Services: Spending for other professional services reached $76 billion in 2012, increasing 4.5%. Spending in this category includes establishments of independent health practitioners (except physicians and dentists) that primarily provide services such as physical therapy, optometry, podiatry, and chiropractic medicine.
- Dental Services: Spending for dental services increased 3.0% in 2012 to $111 billion. Out-of-pocket spending for dental services (which accounted for 42% of all dental spending) increased 3.9% in 2012.
- Other Health, Residential, and Personal Care Services: Spending for other health, residential, and personal care services grew 4.5% in 2012 to $138 billion. This category includes expenditures for medical services that are generally delivered by providers in non-traditional settings such as schools, community centers, the workplace, ambulance providers, and residential mental health and substance abuse facilities.
- Home Health Care: Spending growth for freestanding home health care agencies accelerated in 2012, increasing 5.1% to $78 billion. Medicare and Medicaid spending accounted for approximately 81% of total home health care spending in 2012.
- Nursing Care Facilities and Continuing Care Retirement Communities: Spending for freestanding nursing care facilities and continuing care retirement communities increased 1.6% in 2012 to $152 billion.
- Prescription Drugs: Retail prescription drug spending slowed in 2012, growing 0.4% to $263 billion. The low growth in 2012 was driven largely by a slowdown in overall prices paid for retail prescription drugs, as numerous blockbuster drugs lost patent protection in late 2011 and 2012, and generic versions of those drugs became available.
- Durable Medical Equipment: Retail spending for durable medical equipment reached $41 billion in 2012, and increased 5.6 percent in 2012, the same rate of growth as in 2011. Spending in this category includes items such as contact lenses, eyeglasses and hearing aids.
- Other Non-durable Medical Products: Retail spending for other non-durable medical products, such as over-the-counter medicines, medical instruments, and surgical dressings grew 1.8% to $54 billion in 2012.
Health Spending by Major Sources of Funds:
- Medicare: Medicare spending, which represented 20% of national health spending in 2012, grew 4.8% to $573 billion.
- Medicaid: Total Medicaid spending grew 3.3% in 2012 to $421 billion. The relatively low annual rates of growth in Medicaid spending in 2011 and 2012 can be explained in part by slower enrollment growth tied to improved economic conditions and efforts by states to control health care costs. Federal Medicaid expenditures decreased 4.2% in 2012, while state and local Medicaid expenditures grew 15.0% – a result of the expiration of enhanced federal aid to states in the middle of 2011.
- Private Health Insurance: Overall, premiums reached $917 billion in 2012, an increase of 3.2%. The net cost ratio for private health insurance, the difference between premiums and benefits as a share of premiums, was 12.0% in 2012 compared with 12.4% in 2011. Private health insurance enrollment increased 0.4% to 188.0 million in 2012, but still 9.4 million lower than in 2007.
- Out-of-Pocket: Out-of-pocket spending grew 3.8% in 2012 to $328 billion.
Health Spending by Type of Sponsor*:
- In 2012, households accounted for the largest share of spending (28%), followed by the federal government (26%), private businesses (21%), and state and local governments (18%).
- The federal government financed 26% of total health spending in 2012, a slight decrease from 27% in 2011. The reduction in the federal share reflects the expiration in June 2011 of enhanced federal funding from the American Recovery and Reinvestment Act of 2009.
- The share of the health care bill financed by state and local governments increased from 17% in 2011 to 18% in 2012. This increased share of spending was due to states no longer receiving additional aid from the federal government in the form of enhanced matching rates.
- The remaining sponsors of health care maintained constant shares between 2011 and 2012 — households (28%), private businesses (21%), and other private revenues (7%).
The data in this post is provided by the US Department of Health and Human Services (they seem to remove the data each year – or at least I can’t find urls that continue to work – so direct link doesn’t work anymore).
* Type of sponsor is defined as the entity that is ultimately responsible for financing the health care bill, such as a private business, household, or government. These sponsors pay insurance premiums, out-of- pocket costs, or finance health care through dedicated taxes or general revenues.
While it is good news that the health care spending grew less than GDP did in 2012, it is a big problem that spending has grown from $8,086 per person in 2009 to $8,915 in 2012. Costs need to decrease, not just increase a fraction less than GDP. And they need to decrease for years to reduce the problem from the current catastrophic state to just bad for the economy and thus all of us.
Related: USA Spent a Record $2.7 Trillion, $8,680 per person, 17.9% of GDP on Health Care in 2011 – Health Care in the USA Cost 17.9% of GDP, $2.6 Trillion, $8,402 per person in 2010 – USA Spends Record $2.5 Trillion, $8,086 per person 17.6% of GDP on Health Care in 2009 – USA Spent $7,960 Compared to $3,800 for Other Rich Countries on Health Care in 2009 with No Better Health Results