US health spending reaches a sixth of gross domestic productBMJ 2006; 332 doi: https://doi.org/10.1136/bmj.332.7535.198-a (Published 26 January 2006) Cite this as: BMJ 2006;332:198
US health spending reaches 16% of gross domestic product
Janice Hopkins Tanne
Total spending on health care in the United States grew by 7.9% in 2004 and now accounts for 16% of the gross domestic product, says the National Health Statistics Group of the US Centers for Medicare and Medicaid Services.
Total health spending in the US in 2004 was $6280 (£3520; €5120) per person, or a total for the population of nearly 300 million of around $1.9 trillion, says the group’s report (Health Affairs 2006;25:186-96). The increase is largely due to new medical treatments, rising prices, and greater use of services, the report says. "Medical spending continues to rise faster than wages and faster than economic growth, and workers are paying much more in health care premiums than just a few years ago," it says.
Other industrialised countries spend about 8% of their gross domestic product on health, said Karen Davis, head of the non-profit Commonwealth Fund, which works to improve healthcare coverage and quality in the US.
"We [the US] not only spend more—but the difference [between the US and other countries] has been widening since 1980. We get less. We don’t cover the entire US population. There are 46 million uninsured. The other countries have universal health insurance coverage and guarantee access to care for their entire populations," she said.
In his state of the union address next week, President Bush is expected to suggest allowing small businesses to join together to form health plans; to expand health savings accounts in which people set aside money, tax free, to pay for some health costs while also buying a tax deductible health insurance policy; to expand community health centres, to increase use of information technology; and to reduce malpractice suits.
Although health spending in the US increased by 7.9% from 2003 to 2004, this was the slowest rate of increase since 2000. The authors of the Health Affairs paper say: "The health sector’s share of the gross domestic product increased only 0.1 percentage point in 2004, in part as a result of an above average rate of economic growth (7.0%) in 2004, compared with 4.8% in 2003.
Spending on Medicare (the federal medical insurance programme for elderly people) and Medicaid (the programme for poor people) and by private payers (through private health insurance and on costs not covered by insurance) increased at a slower rate than in previous years.
However, hospitals’ spending, payments for doctors’ services, and payments for home health care increased at a higher rate than in the past.
Medicare spending will be subject to "a major [upward] impact starting in 2006," the report says, because of the new Medicare plan that pays for some prescription drugs. Medicare increasingly relies on general revenue taxes rather than payroll taxes paid by employersand premiums. This means it competes with other government programmes for funds.
Medicaid is paid for partly by the federal government and partly by individual states. Containment of drug costs by the states has slowed the rate of increase of spending on Medicaid. However, the states’ spending on Medicaid is growing faster than their revenues are growing, the report says.
The growth in private health insurance premiums slowed, but it was still greater than the growth in wages.
Spending on drugs, while increasing, has slowed considerably. The reasons are greater use of generic and over the counter drugs, more ordering by mail, and less use of some drugs because of safety concerns.
Spending on home health services grew faster than for any other service category for the second year in a row.
The increase in hospital spending was due to an increase in wages, which account for 60% of hospital expenses, and to higher liability costs. The increase in the cost of doctors’ services was attributed to increasing volume and to patients demanding more services, on average.
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