OverviewHealth care spending includes the costs of obtaining a wide variety of goods and services, from hospital care and prescription drugs to dental services and medical equipment. Most health care spending is for care provided by hospitals and physicians.
Why It's Important
Health insurance covers all or some costs of care and protects people from very high expenses. People without health coverage have to cover all costs. This can sometimes lead people into debt or even bankruptcy. Rising health care costs make insurance less affordable for individuals, families and businesses.
People without health insurance are more likely to lack a usual source of medical care, such as a primary care provider. They more often skip routine and preventive medical care thus increasing their risk for developing serious and disabling health conditions that cost more to treat.
Concerns about rising health care costs and affordability of health care and insurance lead to enactment of the Affordable Care Act, or ACA. The key challenge moving forward will be finding the best mix of policies that promote health and prevent illness, and also ensure that government, corporate, and private health spending is as efficient as possible and best meets the health care needs of the nation.
What Is Known
Health care costs per capita in the U.S. grew an average 2.4 percentage points faster than the GDP from 1970 to 2012. In addition, the share of economic activity (gross domestic product, or GDP) devoted to health care has increased from 7.2% in 1970 to 17.9% in 2010. In 2010, the U.S. spent $2.6 trillion on health care, an average of $8,402 per person. Many experts believe that new technologies and the spread of existing ones account for a large portion of medical spending and its growth. The U.S. spends substantially more on health care than other developed countries. Though the rapid growth in spending for prescription drugs has received considerable attention recently, as of 2010, it accounted for 10% of total costs. Private funds are the largest contributor to health care payments (55% in 2010 compared to 45% from government funds).
New Mexico's aging and expanding population, medical technology advancements, and the limits of managed care to contain costs may cause per capita expenditures to rise. As a percentage of per capita income, per capita expenditures for medical care slowly increased from 1993 to 2009.
Health care insurance costs more today than ever. Health insurance premium increases have consistently outpaced inflation and the growth in workers' earnings. And families are also paying more out-of-pocket for health care. Concurrently, employer shares of payroll going toward health insurance costs continue to rise. In addition, eligibility standards for public programs such as Medicaid and CHIP do not keep pace with rapid increases in the cost of health coverage.
Who Is at Risk
All people are at risk of needing costly health care services during their lives. People without the financial means and/or adequate health insurance coverage are at risk for not receiving the kinds of health care that can optimize their health, especially as costs continue to increase and options for care expand.
Health status is strongly associated with age. In general, health status declines with age. As health status declines, there is more need for medical services. Those with worse health use medical services more often. Women have higher medical services utilization than men.
How To Reduce Risk
Numerous studies show that a disproportionate share of health spending is used to treat chronic and often preventable diseases and conditions. Efforts to improve population health could have a long-term effect on disease prevalence and help reduce health care spending. Many of the Affordable Care Act (ACA) provisions are an attempt to reduce the risk of illness and injury so that people won't require high cost health care in the first place. A critical component of the ACA was the creation of the National Prevention Council and the development of the nation's first ever National Prevention and Health Promotion Strategy. The strategies are designed to move us from a system of sick care to one based on wellness and prevention.
The plan outlines 4 Strategic Directions:
- Healthy and Safe Community Environments
- Clinical And Community Preventive Services
- Empowered People
- Elimination of Health Disparities
It includes 7 Priorities:
- Tobacco Free Living
- Preventing Drug Abuse and Excessive Alcohol Use
- Healthy Eating
- Active Living
- Injury and Violence Free Living
- Reproductive and Sexual Health
- Mental and Emotional Well-Being
Other ACA provisions address health care costs and the ability of individuals to afford those costs including:
- Changes to the way health coverage and health care are provided in public and private settings
- A requirement (with some exceptions) that people obtain health insurance
- Creates new sources of coverage through health insurance exchanges
- Provides for premium and cost-sharing subsidies for those with low incomes
- Significantly expands Medicaid eligibility
- Makes changes designed to slow the growth of Medicare spending
- Short-term cost containment provisions
- Reduces payments to providers for Medicare services
- Eliminates unnecessary costs such as fraud and abuse in Medicare and Medicaid
- Simplifies health insurance administration by creating uniform electronic standards and operating rules for all private insurers, Medicare and Medicaid
- Establishes an approval process for generic biologic agents
- Long-term cost containment provisions
- Creates the Center for Medicare and Medicaid Innovation to evaluate experimental models
- Establishes a new Independent Payment Advisory Board to recommend ways to slow the growth in private nation health expenditure while preserving or enhancing quality of care
- Creates a private Patient-Centered Outcomes Research Institute to identify and conduct research, and disseminate results
- Implements an excise tax on high-cost employer-sponsored health plans designed to encourage employers to make their plans more efficient and to encourage workers to use fewer services.
How It's TrackedHealth Care Coverage Estimates of the number of people who are uninsured are available from several different sources, including a number of federal surveys. Four federal surveys provide this information.
- The U.S. Census Bureau's Current Population Survey (CPS) - state-level estimates
- The American Community Survey (ACS) - state and sub-state level estimates
- The National Health Interview Survey (NHIS) - state level estimates for 43 states
- The Medical Expenditure Panel Survey - Household Component (MEPS-HS)