USA Spent $2.6 Trillion, $8,402 per person,17.9% of GDP on Medical Expenses in 2010

Total health expenditures in the USA in 2010 reached $2.6 trillion, $8,402 per person or 17.9% percent of GDP. All these are all time highs. Every year, for decades, health care costs have taken a larger and larger portion of the economic value created in the USA.

In 2009 the USA Spent Record $2.5 Trillion, $8,086 per person 17.6% of GDP on Medical Care.

USA health care spending grew 3.9% in 2010 following an increase of 3.8% in 2009. While those are the two slowest rates of growth in the 51 year history of the National Health Expenditure Accounts, they still outpaced both inflation and GDP growth. So yet again the health system expenses are taking a bigger portion of overall spending. This has been going on so long that the USA spends double what many other rich countries do on healthcare with no better results.

As a result of failing to address this issue for decades the problem is huge and will likely take decades to bring back just to a level where the burden on those in the USA, due to their broken health care system, is equal to the burden of other rich countries. Over 2 decades ago the failure in the health care system reached epidemic proportions but little has been done to deal with the systemic failures. Dr. Deming pointed to excessive health care cost, back then, as one of 7 deadly diseases facing American business. The fact that every year costs have increased more than GDP growth and outcome measures are no better than other rich countries shows the performance has been very poor. The disease is doing even more harm today.

Some good things have been done over the years, most notably by Don Berwick while at the Institute for Healthcare Improvement. He was effectively thrown out of office by the politicians recently. The same politicians that have through decades of such foolish acts contributed more than any other group to the broken health care system that burdens the USA today. In the last 10 years a significant amount of good work has also been done in “lean healthcare”: applying lean thinking to healthcare. But it is similar to the quote that a “bad system will beat a good person.” With all the bad systemic issues the efforts, good as they are, in lean healthcare are mainly improving around the edges. Of course, “around the edges” of a $2.6 Trillion dollar system can still be extremely valuable and important.

Related: USA Heath Care System Needs Reform – USA Spends Record $2.3 trillion ($7,681 Per Person) on Health Care in 2008 – Systemic Health Care Failure: Small Business Coverage – Measuring the Health of Nations – How to improve the health care system performance – Management Improvement in Healthcare – USA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007

Failing to deal with the obviously broken system for decades puts the USA in a very difficult situation now. The aging baby boomers are likely to make decreasing health care spending much more difficult than it would have been 20 or 30 years ago. And the cost of paying exorbitant prices that the broken health care system imposes increases every year for American business.

Spending data

• Hospital spending increased 4.9% to $814.0 billion in 2010 (in 2009 growth was 6.4%). Average annual growth in hospital spending between 2007 and 2010 was 5.5 %. From 2003 to 2006 spending increased an average of 7.4% per year.
• Spending on physician and clinical services increased 2.5 % in 2010 to $515.5 billion (3.3% growth in 2009).
• Spending for other professional services, which includes providers of services such as physical therapy, chiropractic medicine, and mental health, decelerated slightly in 2010, increasing 3.6% to $68.4 billion after growth of 3.8% in 2009.
• Spending for dental services increased 2.3% in 2010 to $104.8 billion (up 0.1% in 2009). Out-of-pocket spending for dental services accounts for over 40% of dental spending.
• Spending for other health, residential,
  and personal care services grew 5.3 percent in 2010 to $128.5 billion, a deceleration from growth
  of 7.7 percent in 2009. This category includes expenditures for medical services delivered in
  non-traditional settings (such as schools or community centers), ambulance providers, and
  residential mental health and substance abuse facilities.
• Spending growth for freestanding home health care services increasing 6.2% to $70.2 billion following growth of 7.5% in 2009.
• Spending for freestanding nursing care facilities and continuing care retirement communities increased 3.2% in 2010 to $143.1 billion (increased 4.5% in 2009).
• Retail prescription drug spending grew 1.2% to $259.1 billion in 2010 (5.1% growth in 2009). The decrease in the rate of increasing costs was driven by slower growth in the volume of drugs consumed, a continued increase in the use of generic medications, loss of patent protection for certain brand name drugs, fewer new drug introductions, and a substantial increase in Medicaid prescription drug rebates.
• Spending for durable medical equipment, which includes items such as eyeglasses, contacts and hearing aids, increased 7.3% to $37.7 billion in 2010.
• Spending for other non-durable medical products, such as over-the-counter medicines, reached $44.8 billion, an increase of 2.6% in 2010.

Who are writing the checks to pay for these huge costs?

The federal government financed 29% of total health spending in 2010, a substantial increase from its share of 23% in 2007. Meanwhile, the shares of the total health care bill financed by state and local governments (16%), private businesses (21%), and households (28%) declined during the same time period.

• Medicare spending grew 5.0% in 2010 to $524.6 billion (on top of 7.0% growth in 2009).
• Total Medicaid spending grew 7.2% in 2010 to $401.4 billion (on top of 8.9% growth in 2009). Federal Medicaid expenditures increased 8.9%, while state Medicaid expenditures grew 3.9%. Basically, the reason state expenditures “only” grew by 3.9% is $41 billion is aid from the federal government (as part of the attempts to recover from the credit crisis [another crisis greatly enhanced federal by the politicians making very bad policy decisions]).
• Growth in total spending for private health insurance premiums increased to 2.4% after gains of 2.6% in 2009, continuing a deceleration in the rate of growth that began in 2003. The decrease in the rate of growth reflects a decline in private health insurance enrollment, increases in cost sharing, and a shift by some consumers to plans with lower premiums (those reductions in benefits obviously more than overcome by increases in the costs of the benefits that remained).
• Out-of-Pocket: Out-of-pocket spending grew 1.8% in 2010. Faster growth in 2010 partially reflects higher cost-sharing requirements for some employers, consumers’ switching to plans with lower premiums and higher deductibles and/or copayments, and the continued loss of health insurance coverage.

Read more on the National Health Expenditure Data report.

Good consultants and blogs engaged in Deming and lean based healthcare improvement: Mark Graban’s Lean Blog, Associates in Process Improvement, Lee Fried – Daily Kaizen, Paul Levy’s Not Running a Hospital and this blog’s health care related posts.