How Americans Spend Money on Health Care

What's getting expensive the fastest? According to the Bureau of Labor Statistics, which includes detailed inflation data on hundreds of categories of goods and services, no price index is rising faster than hospital services.

But you don't need the BLS to tell you that health care is getting expensive. Employers know it, because they're paying the rising premiums. Workers know it, because those premiums are eating into our paychecks. Washington wonks know it, because Medicare is on pace to gobble up the entire budget later this century. The United States spends about $2.5 trillion -- one in every five or six dollars of GDP -- on health care.

The United States currently spends more per person on health care than any other developed country. Health outcomes in the U.S., however, are among the worst.

According to the report, "Higher health sector prices explain much of the difference between the U.S. and other high-spending countries." Higher health care prices in the U.S. are partly the result of the greater use of medical technology. Another reason is the fragmented insurance system, which does not have a centralized price setting mechanism. By contrast, many European countries — which mostly have a centralized health care system — have placed limits on health care prices, or their growth.

Pharmaceutical spending is a major component of health care expenditure. Drug expenditures, however, have been falling in recent years. According to a recent study, a slowdown in pharmaceutical spending partly explains the recent decline in health care spending growth across the United States. Increased share of generic drugs, due primarily to the expiration of major patents, explains the bulk of the decline in pharmaceutical spending.

Some people identify this situation like a paradox. How could the United States devote so much money to health care and yet rank so poorly relative to other industrialized countries in key indicators of the nation’s health? Per capita, the United States spends nearly double what some of its peers spend, but Americans lag behind in terms of life expectancy, infant mortality, low birth weight, injuries and homicides, adolescent pregnancy and sexually transmitted diseases, HIV/AIDS, drug-related deaths, obesity, diabetes, heart disease, chronic lung disease, and disability rates.

Such a strategy the United States would require a more balanced investment formula, allocating funding more equally between medical and nonmedical influences on health; where health is viewed more holistically and budget responsibility for both health care and social services is centralized in local government.

What's getting expensive the fastest? According to the Bureau of Labor Statistics, which includes detailed inflation data on hundreds of categories of goods and services, no price index is rising faster than hospital services.

But you don't need the BLS to tell you that health care is getting expensive. Employers know it, because they're paying the rising premiums. Workers know it, because those premiums are eating into our paychecks. Washington wonks know it, because Medicare is on pace to gobble up the entire budget later this century. The United States spends about $2.5 trillion -- one in every five or six dollars of GDP -- on health care.

The United States currently spends more per person on health care than any other developed country. Health outcomes in the U.S., however, are among the worst.

According to the report, "Higher health sector prices explain much of the difference between the U.S. and other high-spending countries." Higher health care prices in the U.S. are partly the result of the greater use of medical technology. Another reason is the fragmented insurance system, which does not have a centralized price setting mechanism. By contrast, many European countries — which mostly have a centralized health care system — have placed limits on health care prices, or their growth.

Pharmaceutical spending is a major component of health care expenditure. Drug expenditures, however, have been falling in recent years. According to a recent study, a slowdown in pharmaceutical spending partly explains the recent decline in health care spending growth across the United States. Increased share of generic drugs, due primarily to the expiration of major patents, explains the bulk of the decline in pharmaceutical spending.

Some people identify this situation like a paradox. How could the United States devote so much money to health care and yet rank so poorly relative to other industrialized countries in key indicators of the nation’s health? Per capita, the United States spends nearly double what some of its peers spend, but Americans lag behind in terms of life expectancy, infant mortality, low birth weight, injuries and homicides, adolescent pregnancy and sexually transmitted diseases, HIV/AIDS, drug-related deaths, obesity, diabetes, heart disease, chronic lung disease, and disability rates.

Such a strategy the United States would require a more balanced investment formula, allocating funding more equally between medical and nonmedical influences on health; where health is viewed more holistically and budget responsibility for both health care and social services is centralized in local government.