Latest Health Care Costs 101 Reveals Key Health Spending Trends

Health spending in U.S. nears $1.9 trillion a year. more than $5 billion a day


Growth in U.S. prescription drug spending dropped below 10% for the first time in a decade, while the rate of increase in overall health care spending slowed for the second consecutive year, according to an annual report on spending trends released today by the California HealthCare Foundation (CHCF).

The third edition of Health Care Costs 101 provides a range of data on national health expenditures. It also highlights for the first time how contributions from households, business, and government are blended to finance both public and private health coverage.

The report finds that drug spending increased 8.2% in 2004, the first time since 1995 that spending growth dipped below double digits. The largest categories of health spending are hospitals (30%), physician services (21%), and drugs (10%).

Overall, national health care spending increased by 7.9% in 2004. Premium increases in California and the United States dropped into the single digits for the first time in five years.

“While growth in health spending has slowed, it’s still outpacing inflation and causing headaches for everyone from consumers to the federal government,” said Marian Mulkey, senior program officer of CHCF’s Health Insurance Program. “This latest snapshot puts the numbers into perspective and gives policy leaders and others interested in health spending trends a glimpse of what’s to come.”

The report notes that in 2004 health spending reached nearly $1.9 trillion — an average of $150 billion a month or $5 billion a day. Health care costs now comprise one-sixth of the overall economy, a proportion that is expected to climb to one-fifth in less than ten years.

Other 2006 findings include:

  • The amount spent per person was $6,280 in 2004, an increase of 74% over 1994 levels.
  • Major contributors to health spending include households (32%); private business (26%); federal government (22%); and state and local government (17%).

Taken from public and private data sources, the analysis includes details on:

  • National health spending as a share of gross domestic product, and per capita;
  • Historic payment sources;
  • Spending distribution by contributors and health care categories;
  • Annual growth rates of health care spending and health insurance premiums; and
  • Prescription drug payment trends.

A revised companion guide for California will be available when updated state-level data is released.

The complete snapshot is available through the link below.


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About the California Health Care Foundation

The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford.