Better Solutions for Healthcare

KFF: How has U.S. spending on healthcare changed over time?

By Rabah Kamal, Daniel McDermott, and Cynthia Cox

December 20, 2019

The Quarterly Services Survey provides to most up-to-date look at national health spending, though it does not include spending on prescription drugs, medical equipment, and other health-related expenses that are not considered services. The most recent six quarters have seen somewhat stable growth in spending on health services than in recent years, with the exception of the first quarter of 2018.

Health spending totaled $74.6 billion in 1970. By 2000, health expenditures had reached about $1.4 trillion, and in 2018 the amount spent on health had more than doubled to $3.6 trillion. Total health expenditures represent the amount spent on healthcare and health-related activities (such as administration of insurance, health research, and public health), including expenditures from both public and private funds.

On a per capita basis, health spending has increased over 31-fold in the last four decades, from $355 per person in 1970 to $11,172 in 2018. In constant 2018 dollars, the increase was about 6-fold, from $1,832 In 1970 to $11,172 in 2018.

Another way to examine spending trends is to look at what share of the economy is devoted to health. In 1970, the U.S. devoted 6.9% of its gross domestic product to total health spending (both through public and private funds). By 2018, the amount spent on healthcare had increased to 17.7% of GDP. Health spending as a share of the economy often increases during economic downturns and remains relatively stable during expansionary periods. From 2017 to 2018, the share of GDP attributable to health spending decreased slightly from 17.9% to 17.7% as the general economy outpaced health spending.

From 1970 through 1980, the average annual growth in the U.S. economy was 9.3% per year, compared to health spending growth of 12.1%. Although health spending growth has since moderated, it generally continued to outpace growth of the economy, though by a somewhat smaller margin. The period from 2010 through 2013, however, saw an average annual growth rate in health expenditures similar to growth in GDP. Health spending did pick back up in 2014 and 2015 with the coverage expansions of the Affordable Care Act and growth has been stable in the years since.

The rate of growth for medical services (e.g. services provided by physicians/clinics or hospitals) varied by service type until recent years. During the 1970s, growth in hospital expenditures outpaced other services, while prescriptions and physicians/clinics saw faster spending growth during the 1980s and 1990s. Between 2010 and 2018, average spending growth on prescription drugs and physicians/clinics was 4.4 and 3.8%, respectively. Spending grew at a similar pace for hospitals (4.7%).

Hospital spending represented a third (33%) of overall health spending in 2018, and physicians/clinics represent 20% of total spending. Prescription drugs accounted for 9% of total health spending in 2018, which is up from 7% of total spending in 1970.