JustCare

Half of health care spending goes to doctors and hospitals

Written by

Diane Archer

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A recent Peterson-KFF health tracking report shows that spending on hospitals and doctors has been increasing faster than inflation. Today, half of health care spending goes to doctors and hospitals.

In 2018, about one-third of overall health care spending went to hospitals. Another 20 percent of spending went to physicians and health clinics. And, another nine percent of spending went for prescription drugs. The rate of increase in health care spending for doctors, hospitals and prescription drugs has slowed down some recently.

Over the last nearly 50 years, spending on health care has grown significantly. In 1970, we spent $74.6 billion (6.9 percent of GDP) on health care. Thirty years later, total health spending was $1.4 trillion. In 2018, health care spending more than doubled to $3.6 trillion (17.7 percent of GDP.)

Per person spending on health care in the US was 31 times higher in 2018 than in 1970. It grew from $355 a person to $11,172. In 2018 dollars, per person spending grew six times from $1,832 in 1970 to $11,172.

Not surprisingly, out-of-pocket health care costs also have grown considerably since 1970. They totaled an average of $119 in 1970 ($613 in 2018 dollars) and $1,150 in 2018. These costs do not include premium costs.

Public and private health insurance premiums have also grown. One-third of all health care spending is for private health insurance. In 1970, 21 percent of total health spending went towards private insurance. Public insurance represents 41 percent of total spending, up from 22 percent in 1970. When you include spending on public health and research, the government is responsible for almost half (45 percent) of total spending.

Notably, private insurers have not been able to rein in health care spending as well as Medicare and Medicaid. In addition to having high administrative costs, private health insurers have not been able to rein in provider rates. Private insurer per person spending grew 52.6 percent in the ten years between 2008 and 2018. In stark contrast, Medicare per person spending grew 21.5 percent, and Medicaid per person spending grew 12.5 percent.

Administrative costs grew quicker in 2018 than in the previous ten years. They represented 7.9 percent of overall spending (excluding provider administrative costs). That’s up from 2.8 percent in 1970.

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