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Healthcare spending in the United States totaled 18.3 percent of gross domestic product (GDP) in 2021, according to the Centers for Medicare and Medicaid Services (CMS) in their most recent data update. That’s down from 19.7 percent of GDP in 2020, primarily due to an increase in economic growth as well as a decline in federal COVID-19 funding. However, healthcare costs in the United States remain above their pre-pandemic levels, and they remain a primary driver of our unsustainable national debt.
In nominal dollars, U.S. healthcare spending totaled $4.3 trillion in 2021, or about $12,900 per person — an increase of nearly 3.0 percent from the previous year. Spending on healthcare rose in both the public and private sectors in 2021 for these major sources of funds:
The rise in healthcare costs has consequences for the nation’s fiscal outlook, as the amount and share paid by the federal government has been rising over the past several decades. Government spending has grown from $21.8 billion (26.5 percent of total healthcare costs) in 1971, to $1.5 trillion (34.0 percent of total costs) in 2021.
While the decrease in the growth of healthcare spending relative to GDP is a welcome development, healthcare expenditures remain a major contributor to the rise in federal spending and therefore to the structural imbalance driving our debt. As the federal government continues to pay for increasingly larger shares of healthcare, policymakers should pursue reforms that lower costs and increase efficiency in the American healthcare system.
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