March 5th, 2012
Everyone knows health care is expensive, and is a significant part of our individual and collective budgets. How expensive, exactly? And how is that money spent?
In 2010 we in the US spent $2.6 trillion on health care. That’s 2.6 with twelve zeros behind it, or 2.6 million millions if (like me) you get lost in the zeros. That comes to about $8,500 for each US resident, and more than $11,000 for each adult over age 18.
This is nearly 18% of our $14.5 trillion Gross Domestic Product as a country. For perspective, it’s larger than the entire US durable goods manufacturing sector ($2.3 trillion), which includes, among others, the computer industry ($377 billion) and the auto/truck industry ($360 billion). If US health care were its own country, it would stand at number five in the world, behind Germany and just ahead of France.
Where does it go? The following chart summarizes our outlays of funds (in millions):
Five of every six health care dollars are spent on Personal Health Care (PHC) — the professional direct care we actually ‘consume’ when we visit the doctor or take our medicine. The other categories, together about one-sixth of health spending, represent much of the ‘overhead’ of health care. Administration ($176 billion) includes state and local government program admistration expenditures, as well as the portion of private health insurance that does not directly pay for care. Public Health activities like vaccinations and disease prevention make up another $82 billion.
Structures & Equipment ($100 billion) includes new building construction and capital equipment. Research ($49 billion) represents non-profit and government activities like grants for medical research.
Let’s break down those direct Personal Health Care expenditures further. PHC contains ten major spending categories, as shown below:
Hospitals are the single ‘spendiest’ category, at $814 billion including all services provided in hospitals to patients. Together with Doctors at $515 billion, they represent over 60% of all PHC spending. Note that these spending data are collected at the establishment level, which means they include all revenues collected by, for example, doctors’ offices.
There are four other $100-billion-plus spending categories: Prescription Drugs ($259 billion); Nursing Care (in nursing homes and facilities — $143 billion); Other Care ($129 billion — a catch-all category that includes school and worksite health, as well as residential care for mental health and substance abuse); and Dentists ($105 billion).
Finally there are Home Health Care ($70 billion for medical care provided in the patient’s home, which is growing faster than the other categories); Other Professionals ($68 billion, which includes nurses and physical therapists); Other Non-Durables ($45 billion, which includes non-presciption drugs); and Durable Medical Equipment ($37 billion, which includes eyeglasses and contact lenses, surgical products, and medical equipment rental.)
That’s how health care money is spent in the US, according to data published by the US government. Where does that money come from? Tune in next time…
SOURCE: Analysis by The Knowledge Agency® of data published by the US Centers for Medicare & Medicaid Services, the US Bureau of Economic Analysis, and the International Monetary Fund.