How Much Does Health Care Cost?

So far, I’ve looked at how much my prescriptions cost (almost $6,000 per year) and how much the rest of my health care costs (about $7,100 or $4,250 depending on who you ask). Adding those numbers up, you get $10,250 – $13,100. My share is a bit higher than the American average of roughly $8,000.

That’s right, American companies and individuals spent an estimated 2.5 trillion dollars last year on health care, or about 16% of GDP. [1] That’s up from $2.2 trillion from two years earlier. [2]

Where are all of those dollars spent? The Kaiser Family Foundation published a briefing paper that breaks down the costs:

  • 31% – Hospital care
  • 21% – Physician/clinical services
  • 10% – Other professional services
  • 10% – Retail: prescription drugs
  • 7% – Program administration
  • 6% – Nursing home care
  • 6% – Investment
  • 3% – Home health care
  • 3% – Retail: Other products
  • 3% – Government public health activities

The New York Times presented the numbers slightly differently, but with similar findings for the year 2007:

  • 31% – Hospitals
  • 24% – Doctors (18%) and clinics (6%)
  • 10% – Prescription drugs
  • 9% – Nursing homes and health care
  • 7% – Dental service, other personal care
  • 7% – Administration
  • 6% – Research and construction
  • 3% – Government public health activities
  • 3% – Medical products (other than drugs)

Somewhere in all of those numbers is the amount attributable to medical imaging and diagnostics: about 6% of all spending in 2004 [3 (PDF)]. I’ve been interested in this figure for a while, since part of my work involves helping the engineers who build those high-cost devices and assays.

Overall, the amount spent by publicly administered plans is roughly the same as through private insurance (46% and 42%, respectively) with the rest coming out of pocket (12%).* The cost of administration is significantly lower in public plans than private insurance: less than 2% for Medicare vs. 7% overall.

Furthermore, it appears that there’s a lot of wasted spending in that $2.5 trillion: perhaps as much as 30%.

Based on more than 20 years of utilization research, Dr. John E. Wennberg, director of the Center for the Evaluative Clinical Sciences at Dartmouth Medical School, has established that nearly 30% of U.S. healthcare spending—roughly $630 billion annually—is spent on ineffective, redundant, or inappropriate diagnosis and treatment.

And 75% to 85% of health care spending is dedicated to treating chronic diseases. [4 (PDF), 5] The average per capita spending for the half of Americans without a chronic disease was a mere $994. While these conditions are certainly not all avoidable, many of them are.

Well, that’s enough data for tonight.

* — Basically, 12% of health care spending includes some of the most expensive per-service billings.

This entry was posted in Diabetes, Health Care, Life Lessons, This is who we are. Bookmark the permalink.

One Response to How Much Does Health Care Cost?

  1. toni ayis says:

    thanks for the information, your blog is very interesting, I like it

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