Personal Healthcare Spending in the United States
Personal healthcare spending in the United States averages $11,197 per person according to the latest National Health Expenditure data published by the Centers for Medicare and Medicaid Services (CMS). However, historical data shows that the average amount spent on healthcare per person varies depending on factors such as age, gender, and location.
Each year, CMS publishes a National Health Expenditure Account (NHEA). The NHEA is compiled using data collected from government and private sources – such as Medicare, the CDC’s National Center for Health Statistics, and the American Hospital Association’s annual survey – and lists National Health Expenditures by the types of service or product delivered and the sources of funds that pay for them.
The objective of the NHEA is to analyze personal healthcare spending in the United States and compare it with data from previous years in order to project future spending. The analyses can be important to researchers, business leaders, and policymakers, who use the outputs to more accurately predict what types of healthcare goods and services will be required in the future and how they will be paid for.
How Personal Healthcare Spending in the United States is Calculated
Personal healthcare spending in the United States is calculated by deducting non-personal costs from total National Health Expenditures and dividing the result by the population. Non-personal costs include the costs of government administration, government public health activities, and research. The figure is also adjusted for the “net cost of health insurance” – the difference between the amounts collected in health insurance premiums and paid in benefits.
In 2022, total National Health Expenditure was $4.464 trillion. Once non-personal costs were deducted and the figure adjusted for the net cost of health insurance, the amount spent on personal healthcare in the United States was $3.705 trillion. CMS divided $3.705 trillion by the average population of the United States in 2022 (c.331 million) to calculate an average personal healthcare spend of $11,197 per person.
Where the Funds Spent on Healthcare Came From
CMS’ analysis of where the funds spent on healthcare came from distinguishes between out-of-pocket expenses, private insurance, federal insurance, and other sources. However, it is important to note that “private health insurance, federal health insurance, and other sources” are paid for by insurance premiums, payroll taxes, and other taxes. Although it may not feel like the average person is paying $200+ per week for healthcare – indirectly they are!
Notes: “Out of Pocket Expenses” include co-pays, deductibles, and any amounts not covered by insurance. “Other Third Party Payers and Programs” include workers’ compensation, general assistance (i.e., medical costs covered by auto insurance), school health programs, and federal agencies such as the Substance Abuse and Mental Health Services Administration (SAMHSA).
How the Funds Were Spent on Healthcare in 2022
One of the issues researchers, business leaders, and policymakers will have when reviewing analyses of personal healthcare spending in the United States between 2020 and 2022 is that the amounts spent in some sectors of healthcare vary due to the Coronavirus COVID-19 pandemic. Some sectors of healthcare (i.e., dentists, retail pharmacies, etc.) saw above average spending increases once restrictions were lifted.
Notes: “Nursing Home Care” includes care provided in nursing care facilities, continuing care retirement communities, and nursing facilities operated by the Department of Veterans Affairs. “Other Health, Residential, & Personal Care” includes expenditures on ambulance providers and medical care delivered in non-traditional settings such as schools, senior citizens centers, and military field stations.
Granular Analyses of Average Healthcare Spend
The data used to compile the NHEA is initially summary data. As more detailed data become available, CMS conducts more granular analyses to determine variations in the average personal healthcare spend attributable to factors such as age, gender, and location. The most recent “granularly analyzed” National Health Expenditure Account dates from 2020.
Average Healthcare Spend by Age and Gender
In 2020, the average personal healthcare spend per person was $10,255 per person. However, the average personal healthcare spending in the United States is much lower for younger people and much higher for older people. An analysis of the 2020 data found that:
- The 0-18 age group accounted for 23% of the population, but only 10% of personal healthcare spending. The average healthcare spend per child was $4,212.
- The 19-64 age group accounted for 60% of the population, but only 53% of personal healthcare spending. The average healthcare spend per adult was $9,151.
- The 65 and over age group accounted for 17% of the population, but 37 percent of healthcare spending. The average healthcare spend in this age group was $22,356.
With regards to healthcare spend by gender, per capita spending for male children ($4,415) was 10% higher than per capita spending for female children ($4,009). The situation was reversed in adulthood, mainly due to women in the 19-44 age group claiming maternity care.
In the 65 and over age group, women were responsible for the higher percentage of total spend (55% vs. 45%) due to there being more women than men in this age group. However, male per capita spending in this age group was slightly higher at $22,597, versus $22,162 for females.
Average Healthcare Spend by Location
The variations in personal healthcare spending in the United States are even more noticeable with a state-by-state comparison. Considering the average healthcare spend per person nationwide in 2020 was $10,255 per person, the averages in some states were more than 25% higher, while in other states, the average healthcare spend per person could be more than 25% lower than the national average.
Generally, the average healthcare spend per person per state is consistent with the cost of living in each state. For example, it is more expensive to live in New York than it is to live in Utah – although the low Utah average ($7,522 per person) is also influenced by factors such as a lower percentage of the population in the 65 and over age group. However, there are some anomalies in the location data for 2020.
Despite having a below average cost of living, the average healthcare spend per person in West Virginia was $12,769 in 2020. It is also noticeable that West Virginia spent 30% of its GDP per capita on healthcare. This could be attributable to an elderly population or the state’s significant drug problem. But it could also be attributable to the state’s response to the COVID-19 pandemic and much reduced economic activity.
While it can be a mistake to take the data for 2020 out of context, the breakdown of healthcare spending per capita by state follows a consistent trend. The District of Columbia has consistently recorded the highest per capita personal healthcare spending in the United States, while states in the Southwest and Rocky Mountains areas have consistently recorded a below average healthcare spend per person.
Projections for Future Personal Healthcare Spending in the United States
The projections for future personal healthcare spending in the United States are that it will increase by an average of 5.6% per annum over the next ten years. This is despite several factors that may negatively impact short term growth:
- The expiration of the Families First Coronavirus Response Act continuous enrollment requirement is expected to reduce the proportion of the population covered by Medicare in 2024 and 2025.
- Direct-purchase enrollment is expected to decline in 2026 due to the expiration of the Inflation Reduction Act’s (IRA) Special Enrollment Period and temporary extension of enhanced subsidies.
- The spending cap on out-of-pocket costs for Medicare Part D beneficiaries is due to start in 2025. This may have a temporary impact on spending on high-cost drugs for cancer, rheumatoid arthritis, and other serious conditions.
There is also the as yet unknown impact of the coronavirus COVID-19 pandemic. While demand should be reduced due to the disproportionate number of elderly patients and patients with preexisting conditions that died during 2020, the reduction could be negated by an increased demand for healthcare from patients suffering with “long COVID”.
The impact of these factors may not be known for several years. It will be interesting to see the summary of 2023 personal healthcare spending in the United States when it is published later this year, and the granular analyses of average healthcare spend in 2021 and 2022 – the “recovery from pandemic years” – when these data become available.
