U.S. Healthcare spending: 1950-2020

U.S. Health Care Spending Summary Measures

• Healthcare spend in 1950 was $12.7 billion.
• In 1960, total spending was $27.2 billion, a 7.9% change, representing 5.0% of GDP, with a per capita spending of $146.
• 1970 had a total spending of $74.6 billion, a 10.0% change, representing 6.9% of GDP, with a per capita spending of $355.
• In 1980, total spending was $255.3 billion, a 13.1% change, representing 8.9% of GDP, with a per capita spending of $1,108.
• 1990 total spend was $721.4 billion, an 11.0% change, representing 12.1% of GDP, with a per capita spending of $2,843.
• Total spend in 2000 was $1,369.2 billion, a 6.6% change, representing 13.4% of GDP, with a per capita spending of $4,855.
• In 2010, Total spend was $2,593.2 billion, a 6.6% change, representing 17.3% of GDP, with a per capita spending of $8,394.
• 2015 had a total spending of $3,199.6 billion, a 4.3% change, representing 17.6% of GDP, with a per capita spending of $9,995.
• Total spend in 2020 was $4,014.2 billion, a 4.6% change, representing 18.0% of GDP, with a per capita spending of $12,118.
• Total spend in 2025 is projected to be $5,247.4 billion, a 5.5% change, representing 19.0% of GDP, with a per capita spending of $15,266.

History of Reform

• Long-term healthcare trends revolve around medical care delivery, payment mechanisms, and policy & conceptual approaches.
• Medical care delivery shifts occurred from the 1990s to the 2010s.
• Shifts include from independent hospitals to clinically integrated systems, solo practitioners to group practices, and private to public initiatives.
• Further shifts involved moving from any willing provider to provider networks and from integrated delivery networks to accountable care organizations.
• Payment structure changes went from out-of-pocket payments to third-party insurance, fee-for-service to alternative payment models, and prospective payments.
• Structure changes involve shifting from volume-based to value-based, indemnity payments to risk sharing, and private to public sector initiatives.
• Conceptual approaches to healthcare include the "Iron Triangle" focusing on access, quality, and cost trade-offs.
• Also, "Triple Aim" utilizes Accountable Care Organizations (ACOs) to simultaneously advance population health, improve patient care experiences, and lower per capita costs.

Current Framework: The Affordable Care Act (ACA) of 2010

• Expanded insurance regulations now include guaranteed issue/renewability and elimination of pre-existing condition exclusions.
• Children can now be covered under their parents' health insurance plans until age 26.
• Medicaid expansion and the creation of state health insurance exchanges occurred.
• Individuals are mandated to purchase qualified coverage.
• Employers with over 50 full-time employees must provide affordable health plans.
• Medicare saw spending cuts.
• Savings were allocated for expanded Medicaid eligibility and income-based subsidies in insurance exchanges.
• The act introduced $1 trillion in additional federal taxes.
• New taxes were implemented on heath insurance premiums, prescription drugs and medical devices and increased expense threshold for medical deduction.

Progress Toward Transformation

• The ACA led to 20 million more Americans gaining health coverage, with 13.7 million newly enrolled in Medicaid.
• 7.5 million gained coverage through insurance exchange subsidies.
• The percentage of uninsured individuals decreased from 16% to under 10%.
• Out-of-pocket healthcare spending per person has decreased from 15.5% in 2010 to 10.6% in 2020.
• Insurance coverage did not equate to sufficient care due to specialty care shortages and low reimbursement rates for doctors.
• Many physicians refused to treat Medicaid patients.
• There were issues with exchange websites.
• About 4.7 million Americans lost their plans.
• High-risk populations increased in exchange risk pools.
• High-risk population growth was due to elimination of pre-existing conditions exclusions and coverage of dependents on parents' plans until age 26.
• There were substantial increases in average premiums.
• Several co-op health plans closed due to underfunding and inexperienced leadership.
• Accelerated provider integration lead to horizontal integration of physician practices.
• Horizontal integration resulted in greater practice sizes (higher prices), but no scope economies between specialties.
• Hospital consolidations (mergers), horizontal consolidation, resulted in greater volume, faster throughput, and shorter hospital stays.
• Vertical consolidation (fully integrated system) has reduced competition, and increased bargaining power, resulting in higher prices.

Changes Since Passage

• The Tax Cut and Jobs Act of 2017 eliminated penalties for individuals not adhering to the mandate of having health insurance.
• Association Health Plans (AHP) attempted creating new ways for small businesses to purchase insurance in groups (June 2018), but are still being litigated.
• Short-term, limited-duration insurance was reinstated (August 2018).
• Access to health reimbursement arrangements (HRAs) was widened, allowing use for insurance plans selected by employees (January 2020).
• There was expanded use of Section 1332 State Innovation Waivers
• There was targeted gaming through grace period reductions and alterations to guaranteed issues rules.
• Health savings accounts (HSAs) have been expanded to offer support for chronically ill individuals.