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Healthcare Spending Continues to Rise

By Geoff Cockrell on July 16, 2012
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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.
 

Photo of Geoff Cockrell Geoff Cockrell

Geoff is the immediate past chair of the firm’s private equity group where he served for over a decade. He also formerly served on the firm’s Board of Partners. He has a wide scope of experience in mergers and acquisitions and financing transactions.

Geoff is the immediate past chair of the firm’s private equity group where he served for over a decade. He also formerly served on the firm’s Board of Partners. He has a wide scope of experience in mergers and acquisitions and financing transactions. His mergers and acquisition experience, representing private equity sponsors, strategic purchasers and sellers extends across a diverse number of industries with a primary focus on healthcare provider services transactions. Geoff is a national contributor both at conferences and in publications on a wide array of issues unique to the private equity industry. He regularly contributes to Law360’s Healthcare and Private Equity sections, and is an author of The Healthcare Investor, a blog on healthcare finance topics.

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  • Posted in:
    Health Care and Life Sciences
  • Blog:
    The Healthcare Investor
  • Organization:
    McGuireWoods LLP
  • Article: View Original Source

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