$4.5 Trillion: Beyond the Numbers

Personal healthcare spending represents a significant component of total healthcare spending in the U.S.

Personal healthcare services — including hospital care, dental/home health services, physician services, and prescription drugs — comprise roughly 83 percent of total healthcare spending ($4.5 trillion) in the U.S. (Chart by author from Centers for Medicare & Medicaid Services/CMMS data, 2023).

Healthcare spending has been a major component of the American economy for several years. Many components constitute the total healthcare spending figure — $4.5 trillion in 2022 — including individual payments, health insurer costs, hospital fees, federal government payments, and prescription medicine costs.

Personal healthcare spending represents spending by, on behalf of, or for individuals for needed services. It does not include insurer profits, administrative costs, or public health research or investment.

Total national healthcare spending will continue to grow in the coming years due to several factors. The percentage of the US population aged 65 and over has risen from 14 percent in 2012 to 17 percent in 2022. That trend will continue. Hospital costs, too, are rising — from the cost of prescription drugs to longer average patient stays. And there is inflation, too.

Four-and-a-half trillion dollars represents a significant figure. For comparison, the National Defense Authorization Act (NDAA) recently passed by Congress authorizes about $886 billion for national defense in 2024 and Social Security payments (old age and disability) were about $1.2 trillion in 2022.

As 2024 arrives, here are five fast facts on national healthcare spending in the US and its widespread effects on individuals and society:

1. Rising costs and premiums. Between 2014 and 2020, personal healthcare spending in the U.S. grew (on average) 4.8 percent per year, outpacing the yearly inflation rate. In 2020, per capita personal healthcare spending ranged from $7,522 in Utah to $14,007 in New York. Costs rose again in 2022 and 2023. Out-of-pocket spending grew 6.6 percent to $471 billion in 2022.
   KFF survey data shows annual family premiums for employer-sponsored health insurance in 2023 climbed seven percent on average to roughly $24,000; Employees contribute $6,575 annually toward that premium (as an average).
2. 17.3 percent. Total national healthcare spending as a percentage of national GDP has dropped slightly from a pandemic high in 2020 of 19.7 percent to 17.3 percent in 2022. On a per capita basis, the $4.5 trillion total healthcare spending figure equates to $13,493 per person.
3. 92 percent. The share of the total population that was insured in 2022 reached a historic high: 92.1 percent, equal to that of 2017. Private health insurance remained more prevalent than public coverage (65.6 percent versus 36.1 percent, respectively).
   Massachusetts had the lowest uninsured rate in the US: 2.4 percent; Texas had the highest uninsured rate: 16.6 percent. Health insurance coverage is a key component of personal wellness and public health. New challenges arose in 2023.
4. Medicaid Continuous enrollment ends. Coronavirus pandemic-related legislation passed by Congress in 2020 included a requirement that Medicaid programs keep people continuously enrolled through the end of the federally designated COVID-19 public health emergency. In exchange, states received increased levels of federal funding for Medicaid and related health programs.
   As part of the Consolidated Appropriations Act of 2023, though, Congress delinked the continuous enrollment provision from the public health emergency. This continuous enrollment provision ended on March 31, 2023.
   The result: At least 15 million Medicaid enrollees have been disenrolled (a process known as unwinding) as of early January based on current data from all 50 states and the District of Columbia. Nearly 29 million have had their Medicaid coverage renewed.
5. US life expectancy rebounds. Life expectancy had fallen to 76.4 years by 2021 — down from about 79 years in 2019. Now, data indicates that United States life expectancy rose in 2022. Specifically, the average American (at birth) can expect to live 77.5 years, according to preliminary data from the National Center for Health Statistics.
   This notable turnaround represented an increase of 1.1 years from 2021. Health insurance coverage represents an important component of both individual wellness and life expectancy data.

Healthcare is a large segment of the American economy and it is a multi-dimensional public policy and public health subject. The good news is very good: a record high rate of Americans who are insured, rebounding life expectancy data, and a record number of enrollments (20 million) for health insurance through the Affordable Care Act’s various insurance marketplaces.

(Photo: Hush N. Jade Photography on Unsplash).

But challenges will continue to mount. Rising premiums for employer-provided health insurance, higher deductibles for many who are insured, and continuing challenges in health equity, such as infant mortality. Better linking healthcare spending and costs with positive health outcomes and improved personal wellness should be a priority for government, industry, and individuals alike.