Overview

U.S. health expenditures have continued to grow faster than the gross domestic product (GDP). While technological change is considered the primary driver of health care costs, growth of health insurance and decline in cost-sharing, income growth, lagging productivity in health services, provider and insurer consolidation, and increases in the prevalence of certain high-cost diseases also are considerations. It is likely that attempts to constrain health expenditure growth will be pursued with increasing intensity over the next few years. In addition to previously tried approaches, such as government price-setting and managed care, new strategies, such as consumer-directed health plans, pay-for-performance, and chronic care management, are being evaluated to constrain cost growth and improve outcomes.

Introduction

Between 1993 and 2003, health expenditures in the United States grew from roughly $900 billion to $1.7 trillion, increasing from 13.3 percent of gross domestic product (GDP) to 15.3 percent. U.S. per-capita health expenditures rose to $5,670 by 2003, from $3,354 a decade earlier. Data from the last 25 years indicate that the share of GDP spent on health in the United States has been considerably higher than that spent in Canada, Japan, Germany, or the United Kingdom, and that this difference has widened (Figure 1). This issue brief reviews trends in health expenditures in the United States over the past decade, examines differences between public and private spending, and considers explanations for the growth in spending and strategies intended to contain it.

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