Health care spending as a share of GDP rises to 17.7%

In a paper by Martin et al. (2020) in Health Affairs, CMS’s Office of the Actuary (OACT) has its annual health care spending estimates for 2019. They found that health care spending in the US was $3.8 trillion in 2019, and increase of 4.7%. The share of the economy dedicated to health care rose slightly, from 17.6% in 2018 to 17.7% in 2019.

What were the key drivers of these rising health expenditures?

In 2019 faster growth in spending for hospital care, physician and clinical services, and retail purchases of prescription drugs—which together accounted for 61 percent of total national health spending—was offset mainly by expenditures for the net cost of health insurance, which were lower because of the suspension of the health insurance tax in 2019.

The study found that spending on hospitals rose by 6.2%, physician services 4.7%, and retail pharmacy costs by 5.7%.

Are rising prices–especially drug prices–to be blamed?

With the exception of hospital prices, the answer is ‘no’. Hospital prices rose by 2.0% and physician prices rose by a modest 0.8%. Retail pharmacy prices, however, actually fell for the second year in a row.

Retail prescription drug prices decreased 0.4 percent in 2019 after a larger decline of 1.0 percent in 2018 as price growth slowed for brand-name drugs and declined for generic drugs.