$4.3 Trillion

Healthcare costs have grown exponentially over the past decades, rising from 5 percent of gross domestic product in 1961 ($29 billion) to 18 percent in 2021 ($4,255 billion). While 2020 and 2021’s uptick in healthcare spending is largely due to the COVID-19 pandemic and the federal response to mitigate its impact, healthcare costs will continue to rise in the upcoming decade.

Twice the average of other wealthy countries

On a per capita basis, the U.S. healthcare system is the most expensive among advanced nations. Other OECD wealthy countries, defined as those with the 5 highest GDP and with above median GDP and GDP per capita relative to all OECD countries, spend an average of $6,414 on healthcare per capita. The United States spends over twice that much — $12,555 per capita— and nearly $5,000 more per capita than Switzerland, which has the second-most expensive healthcare system.

All of the above

U.S. healthcare spending is higher than that of other countries for a variety of reasons. Arguably the largest of those factors is prices — studies have shown that the United States has higher prices than other countries for similar services, regardless of utilization level. The structure and complexity of the U.S. healthcare system also play a role in its higher spending levels. For example, the cost of technology and compensation for medical professionals make many procedures in the U.S. more expensive than in other countries. The complexity of the U.S. health insurance system also leads to higher spending on administrative costs relative to other countries.

False

While the United States spends significantly more on healthcare than other countries, its health outcomes are not any better. In fact, the United States actually performs worse in some cases. For example, the United States has been spending more on healthcare per capita than other countries since the 1980s, but the country’s life expectancy has not improved at the same rate as other nations.

Hospital Care

In 2021, hospital care accounted for $1,324 billion — or 33 percent of U.S. healthcare costs. Although high, that percentage has been higher in the past. For example, between 1970 and 1990, about 40 percent of health spending was on hospital care. Following that period, the percentage allocated to hospital care declined to 30 percent until 2010, after which the percentage spent on hospital care began to rise.

Prescription Drugs

Prescription drugs have increased fastest among categories of health spending over the last 50 years, rising from $6 billion in 1972 to $378 billion in 2021. Currently, prescription drugs account for 9 percent of all healthcare expenditures.

Government health insurance programs like Medicare and Medicaid

The government pays the largest share of healthcare costs in the United States. In 2021, $1.8 trillion, or 45 percent of all healthcare consumption costs, were covered by federal health programs such as Medicare and Medicaid. By comparison, private health insurance accounted for $1.2 trillion (30 percent), out-of-pocket costs $.4 trillion (11 percent), and other payers $.6 trillion (15 percent). Furthermore, due to an aging population and increasing enrollment in federal programs, the government is expected to pay an increased percentage, 49 percent, of health consumption expenditures by 2031.

HI in 2031; SMI cannot be depleted

The HI Trust Fund finances healthcare services related to stays in hospitals, skilled nursing facilities, and hospice for eligible beneficiaries; it is primarily funded through a payroll tax on U.S. workers and employers. The SMI Trust Fund, which supports both medical insurance and prescription drug coverage, receives about a quarter of its income from premiums paid by beneficiaries and the rest from the federal government’s general fund.

The HI Trust Fund has consistently been running deficits since 2005, and the Medicare Trustees project that the fund will be depleted in 2031. At that point, program expenses will be limited to incoming tax revenues — which is inadequate to cover costs and would decrease beneficiaries’ access to healthcare services. The SMI Trust Fund cannot be depleted because premiums and transfers from the general fund are automatically adjusted to cover expected costs. However, the Trustees also have expressed concerns about the rapid growth in costs covered by SMI.

True

Medicare benefits far exceed the taxes paid over an individual’s lifetime, and the gap is expected to increase in the coming years. For those who turned 65 in 2015, their lifetime benefits are expected to be $253,000 with lifetime taxes of $84,000 — meaning their benefits will exceed their contributions by $169,000. For those who will turn 65 in 2025 and 2035, that gap is projected to grow wider. This is because while the Medicare tax stays low, prices rise, and new health services are covered.

Major Healthcare Programs

Spending on major healthcare programs is projected to overtake discretionary spending in 2030 and will continue to be the largest category of federal spending through the end of the projection period, 2053. Such spending is projected to rise rapidly over that period, from $1.5 trillion billion (5.8 percent of GDP) in 2023 to $6.8 trillion (8.6 percent of GDP) in 2053. This trend of increased health spending, largely driven by prices, is not new. Since 1962, only two years have had decreases in major health spending when compared to the preceding year. The increased government spending on health must be addressed for our nation’s long-term fiscal and economic well-being.