National Healthcare Spending Briefly Reviewed
Briefly; Data pulled from HealthAffairs. I was curious as to how much healthcare costs have grown in the United States. As the detail from the article shows we have been experiencing costs increasing at 7+ percent the last two years. This is up from 4 and 5% in preceding years. I have not checked it, I am betting the 10% increase is due to healthcare for Covid (more on this later). The charts (1 and 2), numbers and percentages follow . . .
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Health care spending in the US reached $5.3 trillion and increased 7.2 percent in 2024, similar to growth of 7.4 percent in 2023, as increased demand for health care influenced this two-year trend. As in 2023, the use and intensity of health care goods and services continued to grow rapidly in 2024, particularly for hospital care, physician and clinical services, and retail prescription drugs.
The insured share of the population remained relatively high in 2024, at 91.8 percent, after its peak in 2023 of 92.5 percent. Health care spending growth continued to outpace overall economic growth in 2024, and as a result, the health care share of the economy increased from 17.7 percent in 2023 to 18.0 percent in 2024.
Exhibit 1: Health care spending reached $5.3 trillion, or $15,474 per person, growing 7.2 percent in 2024. This was the second consecutive year of growth above 7 percent (growth was 7.4 percent in 2023), after growth of 4.1 percent in 2021 and 4.8 percent in 2022. Healthcare Growth in 2020 at ~10% was more than likely due to Covid.
Exhibit 2: “Growth in personal health care spending averaged 8.9 percent per year (calculated). The highest average growth rate for two consecutive years since 1991–92, when it was 9.1 percent (data not shown for 1991–92). The increased use of health care goods and services in 2024 was somewhat higher than many health insurers anticipated.”
In 2024, the share of gross domestic product (GDP) devoted to health care was 18.0 percent, which was higher than the 2022 and 2023 shares of 17.6 percent and 17.7 percent, respectively (Exhibit 1). For 2023 and 2024, average health care spending growth of 7.3 percent per year was nearly 3 percentage points faster than during 2021–22. In comparison, GDP growth slowed significantly from the period 2021–22, averaging 6.0 percent per year in 2023–24.
“National Health Care Spending Increased 7.2 Percent In 2024 As Utilization Remained Elevated,”| Health Affairs
How profitable are health care providers i.e. the insurers, PBMs, hospitals and so on? Have aggregate profits been rising in proportion to increased spending?
Kaleberg:
I will try to answer this in the best way I know how. First a picture showing costs by country:
A C&P comment from JAMA and more from Yale”
“Total shareholder payouts from S&P 500 health care companies have more than tripled in the past 20 years. Payouts were concentrated among a small number of companies, with the pharmaceutical, biotechnology, managed care, and health care equipment and supplies subindustries distributing the largest amounts. This study was limited to publicly traded S&P 500 companies and did not account for smaller publicly traded or privately held companies or the financial operations of nonprofit entities.”
“Given greater health care affordability challenges for US households and the major role of federal and state governments in financing the health care sector, shareholder payouts have critical implications for stakeholders, especially patients. Increasing capital distributions to shareholders of publicly traded companies may be associated with higher prices and may not be reinvested in improving access, delivery, or research and development. This dynamic raises questions about health care spending effectiveness, efficiency, and equity. Along with measures aimed at lowering prices, health policymakers could follow recent bipartisan legislation stewarding public funding of the semiconductor industry to encourage reinvestment and limit share buybacks.”
I believe that is enough proof that healthcare in the US is costly and increasing. The why of the cost increaes in in the text.
Shareholder Payouts Among Large Publicly Traded Health Care Companies
Shareholder Payouts Among Large Publicly Traded Health Care Companies – Different
I believe they are profitable. Enough so as to payout nicely to shareholders.