The U.S. healthcare cost is increasing at the rapid level. The U.S. national healthcare expenditure grew 4.6% to $3.6 trillion in 2018. The average healthcare expenditure is $11,172 per person in 2018, and accounted for 17.7% of GDP (Gross Domestic Product). The U.S. national health expenditure is projected to be $3.8 trillion with a growth rate of 4.8% in 2019. The trend of healthcare cost increase is very likely to take place in the future.
Healthcare Cost Increase Projection
According to U.S. Centers for Medicare & Medicaid Services, the national health spending is expected to grow at an average rate of 5.5% per year for 2018 to 2027 and will reach approximately $6.0 trillion by 2027. It is a growth of $3.6 trillion in 2018 to $6.0 trillion by 2027. It is very concerning that the cost of healthcare will grow 66% in just 10 years. Based on this estimate the healthcare cost is projected to be $4.01 trillion in 2020.
Healthcare Cost Growth Projection (estimated growth rate of 5.5% per year)
| Year | $ trillion | Year | $ trillion |
| 2018 | 3.60 | 2024 | 4.96 |
| 2019 | 3.80 | 2025 | 5.24 |
| 2020 | 4.01 | 2026 | 5.52 |
| 2021 | 4.23 | 2027 | 5.83 |
| 2022 | 4.46 | 2028 | 6.15 |
| 2023 | 4.71 |
In 2020, the recent COVID-19 pandemic caused a heavy burden to the U.S. healthcare systems. The overwhelming number of patients at the hospitals, shortage of personal protective equipment, and disruption to the non COVID-19 treatment. It entirely changed the way of business not only for the healthcare sector but also for the entire industries.
Healthcare Cost Increase vs Others
Specifically, the cost of medical care services, which exclude drugs, prescription, and supplies, shows the steep growth. The growth rate of medical care service cost has been increased 38.1% (seasonally adjusted) between January 2010 and April 2020 while the cost of medicinal drugs has been increased 26.1% (seasonally adjusted). It is double the rate of overall CPI (consumer price index) growth. The steep increase of medical care service cost is the major driving factor of the healthcare cost increase.
The living Cost Growth by Item 2010 – 2020
(seasonally adjusted)
| Item | % of Increase |
|---|---|
| CPI | 17.7% |
| medical services | 38.1% |
| utilities | 38.1% |
| rent | 36.8% |
| mortgages | 30.1% |
| drugs | 26.1% |
| food | 21.5% |
Additional Reading
The following graph shows the steep curve of medical care service cost increase in recent years. Furthermore, the seasonally adjusted month to month medical service cost increase is 0.52% and 0.51% (seasonally adjusted) in March and April 2020 respectively. The average growth of month to month medical service cost increase is 0.26% between January 2010 to April 2020. This is likely to be an impact from the recent outbreak of COVID-19 virus, which triggered a significant pressure on the healthcare supply chain. Particularly, the cost of medical services between January to April in 2020 has been grown 1.31% (seasonally adjusted), which is the highest rate since 2010.
The cost of healthcare increase comparison 2010 – 2020
The cost of medical services increase January to April By Year 2010 – 2020
(seasonally adjusted)
Healthcare Cost Breakdown
The breakdown of healthcare cost is as follows. The hospital care and physician & clinical services account for 33% and 20% respectively. Not surprisingly, they account for more than 50% of healthcare expenditure. The healthcare spending accounts for 17.9% of GDP in 2017 and expected to grow to 19.4% by 2027.
National Health Expenditures 2017 Highlights
| Healthcare Expenditure | % of Expenditure |
|---|---|
| Hospital Care | 33% |
| Physician and Clinical Services | 20% |
| Retail Prescription Drugs | 10% |
| Residential, and Personal Care Services | 5% |
| Nursing Care & Continuing Care Facilities | 5% |
| Dental Services | 4% |
| Home Health Care | 3% |
| Professional Services | 3% |
| Non-durable Medical Products | 2% |
| Durable Medical Equipment | 2% |
| Others | 13% |
Impact of COVID-19 Disease
However, this does not include the impact of recent outbreak of COVID-19 disease. The congress passed a bill H.R.748 – CARES Act in March 2020. This bill includes $117 billion spending plans for healthcare providers. Additionally, the bill authorizes $150 billion budget allocation for the state and local governments in order to recover some of lost tax revenues and cover other expenses. The state and local government may also use this additional funding from the federal government to cover the logistics of medical resources. The demand for medical supplies and protective equipment is expected to remain higher in 2020 towards 2021. The long-term impact of COVID-19 disease will possibly push the future healthcare expenditure higher than previous estimate.
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