We have discussed the level of NHE in the United States and looked to some degree at how much money is being spent for care by various service categories such as hospitals and physicians.
Answer the following questions:
Examine the trends in expenditures for the service categories presented in the table. What is the magnitude and direction of spending changes within and across each of these categories: the percentage of GDP spent on NHE and the NHE per capita.
What can you say about how the price of medical care services changes? As you think about what you might say, realize that the figures have been adjusted for inflation. Also, assume that not all increases in healthcare costs are caused by increases in utilization.
Examine the rates of growth in the service categories (except the category “other”). What trends do you see in the mix of healthcare services used by the US public? What factors might contribute to these trends?
Full Answer Section
Physicians: Physician spending has grown at a similar rate to overall NHE spending over the past 50 years. The share of NHE spent on physicians has remained relatively stable at around 18%.
Prescription drugs: Prescription drug spending has grown much faster than overall NHE spending over the past 50 years. The share of NHE spent on prescription drugs has increased from 3.7% in 1970 to 10.0% in 2021.
Nursing and personal care facilities: Nursing and personal care facility spending has grown faster than overall NHE spending over the past 50 years. The share of NHE spent on nursing and personal care facilities has increased from 2.5% in 1970 to 9.2% in 2021.
Changes in the Price of Medical Care Services
The price of medical care services has increased faster than inflation over the past 50 years. This is due to a number of factors, including:
Technological advancements: New medical technologies are often expensive, and they can drive up the cost of healthcare.
Increased demand for healthcare: As the population ages and people live longer, the demand for healthcare services is increasing. This is putting upward pressure on prices.
Market consolidation: The healthcare industry is becoming more consolidated, with fewer and larger players. This can give providers more market power and allow them to raise prices.
Changes in the Mix of Healthcare Services
The mix of healthcare services used by the US public has changed over time. There has been a shift away from inpatient care (e.g., hospitals) and towards outpatient care (e.g., physicians' offices, clinics). This is due to a number of factors, including:
The rise of managed care: Managed care organizations (MCOs) such as HMOs and PPOs have incentivized providers to reduce the cost of care. This has led to a shift away from inpatient care, which is more expensive than outpatient care.
The development of new medical technologies: New medical technologies have made it possible to provide more care in outpatient settings. For example, minimally invasive surgery can now be performed in outpatient clinics, which was not possible in the past.
Consumer preferences: Consumers are increasingly demanding more convenient and affordable healthcare services. Outpatient care is often more convenient and affordable than inpatient care.
Factors Contributing to the Changes in the Mix of Healthcare Services
The following factors have contributed to the changes in the mix of healthcare services used by the US public:
The rise of managed care: Managed care organizations (MCOs) such as HMOs and PPOs have incentivized providers to reduce the cost of care. This has led to a shift away from inpatient care, which is more expensive than outpatient care.
The development of new medical technologies: New medical technologies have made it possible to provide more care in outpatient settings. For example, minimally invasive surgery can now be performed in outpatient clinics
Sample Answer
Trends in NHE Expenditures by Service Category
The following table shows the trends in NHE expenditures by service category for the United States from 1970 to 2021:
Magnitude and Direction of Spending Changes
The magnitude and direction of spending changes within and across each of these categories is as follows:
- Hospitals: Hospital spending has grown more slowly than overall NHE spending over the past 50 years. The share of NHE spent on hospitals has declined from 39.5% in 1970 to 31.0% in 2021.