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The Healthcare Investor Insights on Issues & Trends that Impact Investments in Healthcare & Life Science Businesses

Healthcare Spending Continues to Rise

Posted in Healthcare Services Investing

The National Health Expenditure Accounts (NHEA), published by the Centers for Medicare and Medicaid Services (CMS), are the official estimates of total national healthcare spending. The NHEA measures annual U.S. expenditures for healthcare goods and services, public health activities, program administration, the net cost of private insurance and research as well as other investments related to healthcare.

U.S. healthcare spending increased by about 3.9% in 2011 over the previous year, accounting for approximately 17.9% of GDP, the same as in 2009 and 2010, according to CMS. “The increases in such expenditures will continue to outpace economic growth projections, jumping 7.4% in 2014, when much of the insurance expansion created by the [Obama] health law begins”, writes Alex Wayne for www.bloomberg.com. The new law would add 0.1% to the average annual health spending through 2021, according to the journal, Health Affairs.

Health expenditures in the U.S. neared $2.6 trillion in 2010, ten times the $256 billion spent in 1980. Since 2001, employer-sponsored health coverage for family premiums has increased by 113%.

Federal, state and local governments are projected to spend some $2.4 trillion on healthcare in 2021, half of all U.S. medical expenditures; government spending currently accounts for about 46% of healthcare spending, projected through 2013. Total U.S. healthcare expenditures will surpass $3 trillion in 2014 and reach $4.8 trillion in 2012, according to government data.

For the past several years, healthcare technology and prescription drugs have been the primary contributors to the increase in healthcare spending, with that from prescription medications decelerating and healthcare tech and IT increasing. Approximately 7% of healthcare expenditures go toward administrative costs of government healthcare programs and net cost of private insurance (administrative costs, reserves, taxes and P&L), according to data from Kaiseredu.org.
 

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