Drug Costs

There’s More to Health Care Spending Than Drug Costs… Much More

December 20, 2018 8:33 am

The U.S. Department of Health and Human Services (HHS) recently announced that the growth in overall spending on health care slowed last year, from a 4.8 percent increase in 2016 to 3.9 percent in 2017.


You had to pay close attention to the news, however, to glean this nugget: spending on prescription drugs rose by less than half a percent. It was the slowest increase in five years, The Associated Press noted.  


Spending on hospitals and health insurance? Those figures jumped 4.6 percent and 4.2 percent, respectively. Together these two categories represent more than two-thirds of all health-care spending in the United States.


The HHS data mirror facts and figures from IQVIA that this blog discussed earlier this fall. 


These trends are visualized in the Peterson-Kaiser Health System Tracker. Clicking on the tab titled “Trends by Service Type,” users can see hospital spending has been on a dramatic upward trend since 2000. The rise in spending on physicians and clinics has been somewhat less dramatic, though has risen much more quickly than spending on prescription drugs. Clicking on the tab that is titled “Distribution by Service Type,” users can see that total spending on hospitals, physicians, and clinics dwarfs total spending on prescription drugs.


On this page, Peterson-Kaiser notes that in 2017, per capita out-of-pocket spending on prescription drugs also fell, declining to $144 per person in 2017 from $145 per person in 2016. Out-of-pocket spending on physician services, meanwhile, increased to $185 in 2017 from $182 the previous year and hospital out-of-pocket spending increased to $104 from $99 in 2016. As the Peterson-Kaiser chart shows, spending on prescription drugs did increase at faster rates in years past, but as it notes here, that’s because new specialty drugs came on to the market.


What can consumers expect in the years to come? Peterson-Kaiser predicts “growth in per capita drug spending will be moderate through 2026.” Overall, however, “Per capita health care expenditures are projected to grow from $10,724 in 2017 to $16,168 in 2026, which is an average annual growth rate of 4.7 percent.”


The Peterson-Kaiser Health System Tracker also notes that almost three-quarters of Americans (73 percent) say they have an “easy” time affording drugs. Seventeen percent say they have some difficulty, but only nine percent say they have a “very” hard time affording the medicines they need.


One person going without the life-saving treatment he or she needs is one person too many, but as lawmakers tackle health care spending, this full context deserves to see the light of day.