Healthcare Expenditures: A Report Card

US healthcare expenditures have almost doubled in the last two decades (2019 expenditure was up +178% versus 2000), growing from $1,366 billion in 2000 to $3,795 billion in 2019. 

Per capita expenditures have been growing at a slightly slower pace (+139%) in the same period, increasing from $4,838 in 2000 to $11,582 in 2019. 

While the annual growth rate of expenditure has decreased from a peak of 6.1 times yearly inflation in 2003, US healthcare costs continue to increase faster than the inflation rate (2.2x in 2018 and 2.1x in 2019). 

Due to these rising costs, healthcare has continued to grow 33% faster than the overall US GDP, growing from 13.3% of GDP in 2000 to 17.7% of GDP in 2019. 

How do these expenditures break down? 

In 2019 $2,697.7 billion (71.1% of total healthcare expenditures) was spent on delivery which includes hospital care, HCP and clinical services, home care, dental services, and other services (i.e., ambulance). 

$509.4 billion (13.4%) was spent on retail (i.e., pharmacies), with $369.7 billion (9.7%) spent on prescription drugs. 

Payers’ gross profit (what is left to the insurances after reimbursements) was 288.8 billion (7.6%), of which $239.9 (6.3%) went to private insurances and $48.9 billion (1.3%) went to government plans. 

Where are the funds coming from? 

The out of pocket share of total healthcare expenditures has been decreasing for the last six decades from about half (47%) of total healthcare expenditures in 1960 to 11% in 2019. 

The difference was picked up by insurances. Initially, between 1960 and 1990, private insurances grew their share by ~50%, over the last three decades, however, their contribution has remained stable (31-32%). Federal, state and local, government plans (Medicare and Medicaid) also grew their contribution since their introduction in 1965 to 37% in 2019. 

Investments in structures, equipment, and research slightly decreased from 7% in 1990 to 5% in 2019. Research investments decreased from a high of 2.6% in the 1960s and 1970s to 1.5% in 2015 and onwards. 

 What is paid out of pocket by patients versus what is covered? 

Hospital care (31.4% of total healthcare expenditures in 2019) was largely covered by payers, whose share grew from 91% in 1970 to 97% in 2019. 

While HCP and clinical services (23.3% in 2019) were largely paid out of pocket in 1970 (45%), the payers’ contribution increased every decade, reaching 92% in 2019. 

Similarly, prescription drugs (9.7% in 2019) were largely paid out of pocket in 1970 (82%). While drug costs increased at a similar pace with other healthcare expenditures, the out of pocket contribution decreased to its lowest level, 15% in 2019. 

On the other hand, payers’ contribution to nursing and retirement community expenditures (which made up 4.6% of total healthcare expenses in 2019) increased at a slower pace over time, growing from 53% in 1970 to 74% in 2019. 

While expenditures have steadily increased over time, overall out of pocket share has decreased since 1960, with government and payers picking up the difference. 

By putting the Spotlight on patients, Luminous can help you translate data into underlying trends that impact your business.