Cost of Health Care in the USA


A source of statistics, figures, and PowerPoint slides.


Costs of interacting with insurance plans is $31 billion annually and 6.9 percent of all U.S. expenditures for physician and clinical services.


Woolhandler S, Himmelstein DU. Costs of health care administration in the United States and Canada, NEJM 2003;349:768-772

30% of health care dollars go to non-health care

Administrative costs per capita/yr US = $596, Canada $193 (three fold difference)

MD office costs per capita/y, US = $566, Canada = $164

In 1999 private insurers retained $46.9 billion of $401.2 billion collected in premiums.

Private overhead (11.7 %) exceeded Medicare (3.6 %) and Medicaid (6.8 %).

Overall, public and private insurance overhead totaled $72.0 billion — 5.9 percent of the total health care expenditures. Physicians’ administrative costs were $72.6 billion — $261 per capita, or 26.9 % of physicians’ gross income or $259 per capita


Relman A. Second opinion: Rescuing America’s health care. Public Affairs, New York NY, 2007, p.91-2

Medical malpractice (premiums, verdicts, defensive medicine) consume $20-80 billion, about 4% of total health care.


Poisal JA, et al. Health spending projections through 2016. Health Affairs, February 21, 2007, Web exclusive W242.

Keehan S, et al. Health spending projections through 2017. Health Affairs, February 26, 2008.

$2.3 trillion annually and 16.6% of our GDP on health care, $7,800 per capita, health care costs are rising at twice the cost of living, in 2016 the GDP rate will be 19.6%


Gross D. National health care? We’re halfway there. New York Times, December 3, 2006

Private insurance covers 30% of total US health expenditures


Kahn JG et al. The cost of health insurance administration in California: Estimate for insurers, physicians, and hospitals. Health Affairs 2005;24:6

In California, 22% of private health insurance premiums go to administrative costs unnecessary in a public program


Graham Center One-Pager. Who will have health insurance in 2025? American Family Physician 2005;72(10).

Average health insurance premiums will exceed family income in 2025      


JD Kleinke. Oxymorons: The myths of the US health care system. Jossey-Bass, San Francisco, 2001, p.192

US health insurance industry consumes over $300 billion annually in administrative



Ian Urbina. In the treatment of diabetes. New York Times, January 11, 2006, p.1

Average worker carries the same insurance policy for just six years before changing.


Kaiser Family Foundation, 2005, Trends and indicators in the changing health care marketplace.

            Insurance rates increased 73% since 2000


Casalino LP, Nicholson S, Gans DN, Hammons T, Morra D, Karrison T, Levinson W. What does it cost physician practices to interact with health insurance plans? Health Affairs Web Exclusive, May 14, 2009, w533–w543

Dealing with private insurance companies cost US physicians about $31 billion, or

$68,274 each.


Relman, Arnold

physicians influence decisions to use medical services far more than patients do. volume and types of services provided to patients—and hence total health costs—need to be controlled by forces other than the market, such as professional standards and government regulation.


Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care,” The American Economic Review, Vol. 53, No. 5 (December 1963).


Per capita spending varies widely within the Medicare program, not correlated with health outcomes, from roughly $4,000 in Utah to $6,700 in Massachusetts in 2004, In 2005, average costs ranged from about $5,200 in the areas with the lowest spend­ing to nearly $14,000 in the areas with the highest spending


Locke, G. Fixing Health Care Is Good for Business – How many aspiring entrepreneurs are stuck in dead-end jobs because of health concerns? Wall Street Journal Opinion, August 28, 2009


Health-care expenditures are expected to account for about 18% of our GDP, projected to rise to 28% in 2030 and to 34% in 2040. average family’s insurance will double over the next decade—to $25,000 from $13,000. In 1960, U.S. firms spent 1.2% of their payroll on health insurance. In 2006, they spent 9.9%. escalating costs have been passed on in the form of higher prices and flat wages. Money that would have gone to raises has instead been spent on health-care premiums that have doubled over the past nine years.


Science Daily (Nov. 10, 2005)

About $230 billion in health care spending nationally is devoted to insurance



Institute for Health and Socio-Economic Policy. Single Payer/Medicare for All: An economic stimulus plan for the nation. 2009. from the California Nurses Association.

In 2006, health care consumed 25% of the Federal budget.

Costs of health care for the 47 million uninsured would be $81 billion.

196 million citizens use private insurance, 70% of costs from employer contributions, 30% from households.

28 million use Medicaid

Private insurance premiums totaled $721 billion in 2006

Research cost $42 billion in 2006, medications $216 billion

There were 196,000 MDs working in the US in 2007

White House: Rising Cost Of Insurance Leads To Hidden Tax – Planet Money Blog : NPR 9/23/09 7:08 AM

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September 23, 2009

            Average premium for single person 2009 = $4800 annual


            Components of health care expenditures, 2006, $ billion

            Hospitals                                  $648    31%

            Physicians, professionals         $598    28%

            Medicines, other products        $276    13%

            Administration, private/public $204    10%

            Research, investment               $134    7%

            Nursing & residential care       $125    6%

            Other ambulatory care services            $62     3%

            Home health services               $53     2%


Lee PV, Berenson RA, Tooker J. Payment Reform — The Need to Harmonize Approaches in Medicare and the Private Sector. New Engl J Med 2010;362:3-5

            Medicare consumes $414 billion annually of $2.4 trillion


Historical NHE, including Sponsor Analysis, 2007:

  • NHE grew 6.1% to $2.2 trillion in 2007, or $7,421 per person, and accounted for 16.2% of Gross Domestic Product.
  • Medicare spending grew 7.2% to $431 billion in 2007, or 19 percent of total NHE.
  • Medicaid spending grew 6.4% to $329 billion in 2007, or 15 percent of total NHE.
  • Private spending grew 5.8% to $1.2 trillion in 2007, or 54 percent of total NHE.
  • Hospital expenditures grew 7.3% in 2007, up from 6.9% in 2006.
  • Physician and clinical services expenditures increased 6.5% in 2007, the same rate of growth as in 2006.
  • Prescription drug spending increased 4.9% in 2007, a deceleration from the 8.6% growth in 2006.
  • At the aggregate level in 2007, businesses (25 percent), households (31 percent), other private sponsors (4 percent), and governments (40 percent) paid for about the same share of health services and supplies as they did in 2006.

NHE by Age Group, Selected Years 1987, 1996, 1999, 2002, and 2004:

  • Per person personal health care spending for the 65 and older population was $14,797 in 2004, 5.6 times higher than spending per child ($2,650) and 3.3 times spending per working-age person ($4,511).
  • In 2004, children accounted for 26 percent of the population and 13 percent of PHC spending.
  • The working-age group comprised the majority of spending and population in 2004, at 52 percent and 62 percent respectively.
  • The elderly were the smallest population group at 12 percent of the population, and accounted for the remaining 34 percent of spending in 2004.
  • Spending for those 85 years and older relative to spending for all other age groups, decreased from 1987 to 2004, mainly due to a slowdown in nursing home spending.
  • Medicare enrollment growth is anticipated to be a stronger influence on future spending growth than the changing age-mix of the Medicare population.