July 10, 2020

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Health Care Costs Accounted for 17.7 Percent of GDP in 2018

 

In the midst of the health crisis caused by the COVID-19 pandemic, the government has released new information about the amount spent on health care in 2018 in the United States. The following infographics show data from the 2020 edition of Health Care Costs 101 focusing on the $3.6 trillion spent in the US on health care. That expenditure represented 17.7% of the economy.

Health spending amounted to $11,172 per person, including $1,150 on average for out-of-pocket costs. Per person spending in the US was double that of most other developed nations. Hospital care was by far the largest category of health spending. The data show the continued importance of private insurance (mostly employer-based), which paid for about one-third of health spending. Job losses in 2020 (more than 40 million COVID-19-era jobless claims as of May 28) may result in significant shifts in coverage from employer-sponsored plans to public coverage such as Medicaid. About 3% of health spending went to government public health activities. At that level, public health departments were ill prepared for large-scale contact tracing or testing for COVID-19. While the full impact of the virus on spending has yet to be seen, it is likely to alter costs of care and to highlight stress points in the nation’s health care system.

The share of the economy devoted to health care remained relatively stable in 2018 due to a strong economy and moderate growth in health spending.

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Historically, health spending has grown faster than the economy. Health care has consumed an increasing share of resources, climbing from 6.2% of gross domestic product (GDP) in 1968 to 17.7% in 2018, down from 17.9% the previous year. If the economy experiences an extended slowdown on the heels of COVID-19, health care could consume a much larger share and crowd out other needs, like education. Health care spending, excluding the impact of the pandemic, is projected by the government to continue to outpace economic growth, reaching 19.7% of the economy in 2028.

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Annual health insurance spending per Medicare beneficiary is double the amount for employer-sponsored insurance and is projected to increase from $12,784 in 2018 to $20,751 in 2028. By comparison, employer-sponsored spending per enrollee will increase from $6,103 to $9,523 during the same period.

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Hospital care ($1.2 trillion) was the largest spending category, accounting for one-third of health spending. Physician and clinical services, at 20% of spending, and prescription drugs at 9%, were the second- and third-largest components of spending. The net cost of health insurance — which includes administration expenses, taxes, and profits of private insurers — accounted for 7% of spending. The net cost of health insurance also grew the fastest, both in 2018 (13.2%) and as measured by its 20-year average (8.6%).

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Public health insurance, including Medicare and Medicaid, paid 41% of the nation’s health care bill in 2018. Private insurance paid about one-third. With the growth in the aging population, Medicare is projected to pay for one-fourth of health spending in 2028, up from about one-fifth in 2018.

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Households, government, and business share in the financial sponsorship of health care. Federal spending includes Medicaid and Medicare, as well as marketplace subsidies. Household spending includes out-of-pocket costs for copays, deductibles, and care not covered by insurance, as well as enrollees’ share of health insurance premiums and Medicare payroll taxes. Private business spending consists mainly of employer contributions to health insurance plus Medicare payroll taxes and workers’ compensation insurance.

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Impact of COVID-19 on Health Care Costs Yet to Be Known

The full impact of COVID-19 on health care spending will depend on a number of unknowns, including infection and hospitalization rates, the share of cases requiring intensive care unit support, and the development of new treatments or vaccines. Hospitalization, which can occur in roughly 15% of confirmed COVID-19 cases, was estimated at $20,000 per case, and more with ventilator support. While individual testing costs may range from $36 to $51, the widespread testing desired could make total costs high. Extensive delays in routine care and elective procedures could offset the direct costs of COVID-19. These delays have been severe enough that providers have begun sounding alarm bells about financial solvency. For example, a recent CHCF survey found one-third of California’s primary care doctors worry their practices won’t survive the financial consequences of the COVID-19 pandemic. Finally, employment and insurance loss are likely to cause people to forgo care, as was documented during the recession that ended in 2009.

 

Along with the full Health Care Costs 101 report, a quick reference guide and an interactive data presentation are also available through the links below.

The post Health Care Costs Accounted for 17.7 Percent of GDP in 2018 appeared first on California Health Care Foundation.