How much do we spend on health care?

March 8, 2012 — Leave a comment

I thought answering how much we spend on health care would be quick, but I should have known it would get complicated fast.  Health insurance is one of those things you hate paying for until you need it!

I’m going to review the health care spending from two different perspectives.  The first perspective will be from individual’s expenses while the second is total health care expenses divided down to an individual level.  The second perspective includes all company, insurance, and government expenses.

How much do we spend on health care per family?

The data from the individual US health care spending is compiled by the US Census Bureau.  According to their report, the average family (2.5 people) spends $261 per month on healthcare expenses which includes health insurance, medical services, drugs, and medical supplies.  That equals $3,126 per family per year.

The majority of the expenses are from health insurance.  That doesn’t surprise me as my family of two pays $193 per month, and my employer adds $400 per month for my coverage!   We even changed our insurance to the higher deductible plan and were recently reminded of this when my wife had a check up and we had to pay out of pocket because we hadn’t hit our deductible for the year.  Bummer.

Health care is scary, but the scariest part is the increase in expenses the last ten years.  We always hear about it in the media, but can you believe the cost of health insurance has increased by almost 94% in ten years?!  Brutal.  It doesn’t appear to be decreasing anytime soon.

Here are the averages of how much we spend on health care per family:

Health care Avg spending per household

What’s the total spent on health care per individual?

According to the Organization for Economic Development, we spend $7,960 per person per year for health care in the U.S., totaling about $2.5 trillion.  According to the report, the U.S. Government covers 46% of U.S. health care expenditures, which means taxpayers pay for $1.13 trillion of health care spending.  This includes expenses on government health care and Medicare.

That’s a lot of money.  My personal health insurance ($7200 total, $3,600 per individual) is less than half of the OECD’s estimate per individual.  That means a lot of the money is being spent on other people.

According to another report by the Peter G Peterson Foundation, “Approximately 30 percent of Medicare spending takes place within the last year of life, and over 75 percent of health care spending goes toward patients with chronic diseases.  Some of the most expensive chronic diseases are heart disease, diabetes, and hypertension—all three of which are tied to obesity, a common problem in the U.S.”  I think we found who those expensive individuals are… not a big surprise.

Why the big difference between individual health care spending and total health care spent in the US?  The main reason is the huge amount of health care expenses associated with the final years of our lives.

According to the chart below, $2,922 a year is spent per individual on hospitals and nursing homes.  Obviously we don’t all visits hospitals and nursing homes every year, so a small percentage of people are accounting for the majority of expenses.  Another large chunk ($803 per individual per year) is spent on “Public health & administration”.  That’s what we call… Overhead!

Unfortunately, health care will continue to be one of those double-edged swords… the only thing worse than not having it is needing it and not having it!

Health spending per capita US

 

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