First we've got to get a handle on what the US actually spends on healthcare. According to the Centers for Medicare & Medicaid Services (National Health Expenditures 2016 Highlights - CMS.gov), US healthcare spending reached $3.3 trillion in 2016, or $10,348 per person. That represents 17.9% of the gross domestic product (GDP). For comparison, the “Comparable Rich Country” average for healthcare spending was $5169 per person in 2016 (10-12% of GDP, depending on the specific country).
Per the CMS, US healthcare spending by type of service or product breaks down as follows:
- Hospital Care - 32% share
- Physician and Clinical Services – 20% share
- Prescription Drugs – 10% share
- Other Professional Services (e.g., physical therapy establishments) – 3% share
- Dental Services – 4% share
- Other Health, Residential, and Personal Care Services (e.g., ambulance providers) – 5% share
- Home Health Care – 3% share
- Nursing Care Facilities and Continuing Care Retirement Communities – 5% share
- Durable Medical Equipment (e.g., hearing aids) – 2% share
- Other Non-durable Medical Products (e.g., surgical dressings) – 2% share
And here's the CMS breakdown on US healthcare spending by major sources of funds:
- Medicare – 20% share
- Medicaid – 17% share
- Private Health Insurance – 34% share (about 60% employment-based)
- Out-of-Pocket – 11% share
Plus a few interesting factoids from other sources:
- Per Enrollee Medicare Spending (2014) - $10,986
- Average per Medicare enrollee out-of-pocket costs(2016) - $3,024
- Per Full-Benefit Enrollee Medicaid Spending (2014): $6396
- Average Annual Single Premium per Enrolled Employee For Employer-Based Health Insurance (2016): $6101
What surprised me was how expensive Medicare is. More than a quarter of all beneficiaries spend at least 20% of their income on out-of-pocket expenses. Also known as a recipe for impoverishment. Despite what we've heard, Medicare is no bargain compared to private medical insurance. Chew on that, "Medicare for All" enthusiasts.
Then again, two-thirds of Medicare beneficiaries are elderly so the comparison is not really fair. Medicaid costs are closer to private insurance but that isn't a fair comparison either: two-thirds of Medicaid enrollees are children, who bring the average cost down.
Bottom line: the US spends too much on healthcare.
Next: why high US healthcare costs matter. Later: what can be done about it, 2018 edition.