WBB's Thought Leadership

U.S. Healthcare Spending Reaches Historic High of $10,345 per Person

July 19

Summary: An HHS report projected healthcare spending will increase by an average 5.8% between 2015 and 2025, which exceeds the U.S. gross domestic product (GDP) growth rate. The 2016 update to U.S. per capita health costs of $10,345 reflects a sharp increase over the 2015 Organization for Economic Co-operation and Development (OECD) Health Statistics report, in which the U.S. had an estimated per capita health cost of $8,713.

Excerpt: “Growth is projected to average 5.8% from 2015 to 2025, below the pace before the 2007-2009 economic recession but faster than in recent years that saw healthcare spending moving in step with modest economic growth. National health expenditures will hit $3.35 trillion this year, which works out to $10,345 for every man, woman, and child. The annual increase of 4.8% for 2016 is lower than the forecast for the rest of the decade.

A stronger economy, faster growth in medical prices, and an aging population are driving the trend. Medicare and Medicaid are expected to grow more rapidly than private insurance as the baby-boom generation ages. By 2025, government at all levels will account for nearly half of healthcare spending, 47%. Despite much effort and some progress reining in costs, healthcare spending is still growing faster than the economy and squeezing out other priorities, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan group that advocates for reducing government red ink.

The $10,345-per-person spending figure is an average; it does not mean that every individual spends that much in the healthcare system. In fact, U.S. healthcare spending is wildly uneven. About 5% of the population — those most frail or ill — accounts for nearly half the spending in a given year, according to a separate government study. Meanwhile, half the population has little or no healthcare costs, accounting for 3% of spending.

Of the total $3.35 trillion spending projected this year, hospital care accounts for the largest share, about 32%. Doctors and other clinicians account for nearly 20%. Prescription drugs bought through pharmacies account for about 10%. The report also projected that out-of-pocket cost paid directly by consumers will continue to increase as the number of people covered by high-deductible plans keeps growing.”

WBB Assessment: Although various initiatives have attempted to reduce the total cost of healthcare, only a slight reduction in the rate of increase has been achieved, and the cost of healthcare continues to climb faster than the GDP. With a healthcare cost of 17% of GDP, the U.S. is far from the target of the OECD average (9.3%). U.S. politicians and healthcare leaders face formidable obstacles to reducing healthcare costs, and political pressure may continue to grow for radical changes to the healthcare system.

Source: AP News Archive

Matthew Loxton

Matthew Loxton
Senior Analyst

Mr. Loxton is a certified knowledge management practitioner with extensive international experience in putting knowledge to work in achieving organizational goals. He has served in senior, global KM roles in the US and Australia, and holds a master’s degree in knowledge management from the University of Canberra. Matthew is a peer reviewer for the international journal of Knowledge Management Research and Practice, and has written numerous KM articles for various publications on customer service, analytics, and knowledge management. Mr. Loxton’s pro bono roles have included KM and IT governance support for the Queensland Emergency Medicine Research Foundation (QEMRF) and the St. Andrew’s Medical Research Institute (SAMI).



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