Short Takes On News & Events

Health Care Spending In America, In Two Graphs

By Lam Thuy Vo and Jacob Goldstein, NPR News

February 4th, 2013, 5:34 PM

This story comes from our partner .

Spending on health care has, of course, been rising in the U.S. for decades. Health care now accounts for 18 cents of every dollar Americans spend, up from 7 cents in 1970.

But where, exactly, is all that money going? And, for that matter, where is the money coming from to pay for all that health care? We found answers to both of these questions in this data set.

First, here’s where the money is going.

Source: Centers for Medicare and Medicaid Services. Illustration by Lam Thuy Vo/NPR

Despite huge changes in medicine and medical technology, the share of health dollars that flows to each major category has changed little in the past 40 years. In other words, spending on each category — drugs, hospitals, doctors, etc. — has increased at about the same rate.

What has changed dramatically is where the money comes from.

Source: Centers for Medicare and Medicaid Services. Illustration by Lam Thuy Vo/NPR

In 1970, by far the biggest share of health care spending was what people spent out of their own pockets. Today, insurance (private plans along with Medicare and Medicaid, which are government-run) covers almost everything.

We emailed Uwe Reinhardt, the Princeton health economist, to ask about this shift.

Insurance coverage has become much more comprehensive, he said.

For example, in 1970, people typically had to pay for drugs out of their own pockets. By 2000, it had become routine for private insurance to cover drugs. Medicare drug coverage began in 2006.

What’s more, he said, in many cases, employees gave up some freedom of choice in health care in exchange for less out of pocket spending. But that trend is reversing itself, he said.

“Now we are going the other way, with higher deductibles and coinsurance for employer-based plans,” he said.

giant, long-term study conducted in the ’70s and ’80s is relevant here. Researchers randomly assigned people to receive different types of insurance — some had full coverage, while others had to pay for a big chunk of the care they received.

People had to pay more for care tended to get less care. And people who were poor and who had to pay more for care fared worse on some key health measures.

The underlying question here is one of the oldest and most contentious in health economics: What costs should health insurance cover, and what costs should be left to individual patients?

For more, see NPR’s recent story on insurance coverage for breast pumps, and see the Kaiser Family Foundation’s Health Care Costs Primer. (KHN is an editorially independent program of the Kaiser Family Foundation.)

11 Responses to “Health Care Spending In America, In Two Graphs”

  1. perry says:

    I wish they would put up a side by side comparison graph showing Department od Defense (DOD) spending. Fact is, DOD spending is more than eclipses Medicare, Medicaid and Social Security all put together. If that isn’t bad enough, we still spend hundreds of billions on weapons systems that are no longer relevant for the enemy we fight. When you are fighting a 21st century enemy like al-Qaida, you don’t do it with 20th century weapons like intercontinental ballistic missiles. Even war hawks like Senator John McCain and Senator Lindsey Graham should know that! Our DOD is sorely outmoded for 21st century warfare. Then there’s the waste, fraud and abuse that exists in the DOD. Congress says DOD can’t be audited because it’s too big. That is nonsense! If it’s contained in the budget, whether it’s a Democrat or Republican budget, it must be audited. No department in the federal government should be allowed to escape scrutiny. If healthcare spending is exposed to scrutiny, then the DOD must be exposed too. Being too big is not an excuse.

  2. Katherine says:

    Perry obviously has a huge bias. Sure there is an abundance of mismanagement within the DOD as with anything the government manages, but that is the number one priority of the United States Government – protecting us! The federal government manages nothing well and should not be involved in our health care, obviously the postal service, our retirement, our children’s education and the subsidies going to an embarassing number of people that have refused to work for generations. Those priorities are best left to the state and local governments which can better gauge what is truly needed.

  3. larry says:

    Dear Perry,

    I’m a Republican and I happen to agree with people like Senator McCain and Senator Graham when they say we need to maintain a strong defense department. Can you imagine if al-Qaida decided to hold a Normandy style D-Day invasion off the coast of Kentucky or Ohio? I can! What would we do? In my opinion, al-Qaida has their thousands of nuclear ICBM’s aimed at us right now! In my opinion, al-Qaida is just waiting for an excuse to launch them. In my opinion, we need to be ready for an al-Qaida missile attack at any moment. Don’t you see that? Most Republicans think like I do. In my opinion, al-Qaida could possibly be flying their drones over American cities as we speak. The world is a very dangerous place! Don’t believe me? Ask any Republican.

  4. larry says:

    Katherine has it right! We need to end Medicare, Medicaid and Social Security immediately and transfer those tax dollars to the defense department. After all, what good is feeding the poor and caring for the seniors and building roads and bridges and schools and what good is funding education if al-Qaida is allowed to continue to aim their nuclear ICBM missiles at us and if the al-Qaida Army, al-Qaida Marine Corps, al-Qaida Air Force and the al-Qaida Navy is allowed to conduct operations off our coasts and invade our cities and towns? Simply ask any Republican. They know! They will tell you that a Normandy style invasion could happen at any moment and we need to be prepared!

  5. TRACY FEE says:

    Okay, now put up a chart showing how much premiums cost Americans in 1970 and 2010. They have gone up so much, they should cover more. I’m still spending a great deal out-of-pocket, it’s just that now it doesn’t pay for my healthcare, it pays for my premiums! I would be much happier to pay small premiums and have less comprehensive insurance coverage, because then I wouldn’t have to pay, unless I need it. Right now, I have to pay that amount whether I get sick or not. Hmmm…, let’s see, that sounds like a real good deal for the health care companies. Greed at it’s finest

  6. Rob says:

    What data are you using to support the claim that DOD spending is more than Medicare, Medicaid and Social Security combined?

    According to the CBO’s preliminary estimate, Medicare, Medicaid and Social Security spending was $1,481 bn in FY2012 and Defense spending was $678 bn. The forecasted DOD budget for FY2013 is $613.9 bn.

    I guess you are allocating expenses from other parts of the budget to defense. The max allocation I can find puts total 2012 military spending at $1,415 bn. So, slightly less than Medicare, Medicaid and Social Security combined.

    I am not suggesting we don’t have areas to cut in defense. Just want to clarify your claim.

  7. larry says:

    “I guess you are allocating expenses from other parts of the budget to defense. The max allocation I can find puts total 2012 military spending at $1,415 bn. So, slightly less than Medicare, Medicaid and Social Security combined.”

    I’ve fact checked your numbers and have found that your $613.6 figure for defense is not even close. My research shows an “unaudited” defense budget that is at least twice that figure. The fact that nobody even suggests an audit is outrageous. Auditing the defense department is long overdue. Mainly Republicans can take most of the blame but both parties have shown little concern for their fiduciary responsibilities in this regard, and yet they want to audit and cut everything else. When people say defense is bloated, they are being kind regarding the defense department. Bloated does not even come close to a proper description of how outrageously over funded defense really is.

  8. Richard says:

    Perry – your interest in a comparison of these areas of government spending seems reasonable, but the Kaiser Family Foundation is focused on health issues & policy and (in my opinion) publish outstanding data and analyses in that area. They remain non-political in an emotionally charge issue by simply reporting the data and analyzing in objectively.

    Katherine – I don’t believe that state govts can address issues of healthcare any better than the Federal, but I do believe that a compassionate country should try to provide safety-net support for vulnerable citizens, which is why we have M_care, M_Caid & SS. Your claims of mismanagement would be more credible if you could provide meaningful data like Rob did (especially about the generations of people unwilling to work).

    Tracy – yours seems like a relevant perspective to me. You can probably find data specific to increases in premiums with minimal research.

    Rob – thanks for being the only one so far to provide any data to support your observations and for questioning claims that lack such data.

    Larry – sarcastic, self-righteous, narrow-minded fool. Bug off.

  9. Anonymous says:

    Hey, I enjoyed Larry’s sarcasm. He’s in touch with reality. Even though he puts it in an over-the-top fashion.

    The interesting part to me is the FIRST chart — it is fascinating that these percentages still track so well even after DRGs and stuff. (though 6% reduction in hospital share is still a definite reduction)

  10. Even More Anonymous says:

    Apologies to Larry: that he has to endure flaming even on a policy-oriented site such as this. I found his method of explaining his idea helpful – in the same way that tongue-in-cheek social critics such as Jonathan Swift, Mark Twain, H.L. Mencken and, now, Jonathan Stewart make use of exaggeration to highlight the ridiculousness of some of our assumptions.

    More to the point, Richard, name-calling has no place on this site.

  11. civisisus says:

    This graph of historical changes in household spending on items like health care doesn’t even cover the latest 10 years:

    http://content.healthaffairs.org/content/23/3/10/F2.large.jpg

    Get back to me when any of you realizes the charts provided in the Lam/Goldstein post can lead you to very confusing conclusions about health care spending’s impact on any of us individually or collectively

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