Medical Spending Increased 14% Between 2016 and 2019, Topping $3 Trillion for First Time

Health care spending reached $3 trillion for the first time in 2019 — the latest available data — accounting for 14.3% of the U.S. gross domestic product (GDP). That’s up from $2.69 trillion in 2016.

Health care spending (2016 to 2019)

Spending on disease-related medical services rose 14.9%. Within this category, spending increased the most for mental illness services, jumping from $104.0 billion in 2016 to $134.6 billion in 2019. That’s an increase of 29.4%.

Spending on disease-related medical services (2016 to 2019)

According to Townsend, insurance plans likely play a role in rising health care costs, particularly for mental illness services. A lack of plan choices prevents competition between insurers and ultimately drives prices higher.

Despite policies aimed at increasing mental health service access for Americans who rely on government-sponsored plans, Medicare coverage for serious mental illnesses is limited compared to Medicaid plans. Medicare also doesn’t reimburse licensed professional counselors. To make matters worse, psychiatrists are increasingly less likely to accept any insurance than other physician specialties.

Spending for neoplasms ranked second within the disease-related medical services category, with an increase of 22.8% between 2016 and 2019. Neoplasms, or abnormal masses of tissue, include benign (not cancerous) and malignant (cancerous) diagnoses.

Cancer ranks higher for spending overall than non-malignant neoplasms, coming in seventh for cost per case (22.7%) and number of episodes (23.2%). While Centers for Disease Control and Prevention (CDC) data on cancer trends reveal that cancer rates are dropping, the number of new cases and deaths are going up. This is possible because the population of older Americans is rapidly increasing. According to the U.S. Census Bureau, those 65 and older — the age group most at risk for the majority of cancers — grew in population by over a third during the past decade and by 3.2% from 2018 to 2019.

Spending on medical provider services (2016 to 2019)

Spending on administrative and social admissions, or hospital admissions related to a patient’s social circumstances rather than an acute medical condition, has also risen by 24.2%. Additionally, the cost per case has risen from $543 to $629. That’s an increase of 15.8%.

Cost of administrative and social admissions by year

These patients are typically older and suffer from progressing illnesses, disabilities or general health declines. These patients are usually admitted after their family members or another informal caregiver can no longer safely meet their care needs. However, as the cost of treating administrative and social admission cases continues to rise alongside the rising costs of treatment for most medical conditions, informal caregivers may risk providing inefficient care to avoid overwhelming medical bills.

One reason administrative and social admission costs have risen may be because the cost of operating a hospital is also rising. Hospitals, physicians and clinics and administration costs often make up more than half of the total health care spending — according to 2019 data from the National Health Expenditure Accounts of the Centers for Medicare & Medicaid Services — a trend that’s continued as health care spending rose.

Spending on pharmaceutical products, therapeutic appliances also rising

Beyond just the cost of medical treatments by disease or provider, medical spending is also on the rise in categories that affect a consumer’s everyday life. In particular, the cost of pharmaceutical and other medical products has risen by 12.8%. Within this category, spending on pharmaceutical products (excluding prescription drugs) has risen by 12.7%, and spending on all other medical products has risen by 14.4%.

Spending on pharmaceutical and other medical products (2016 to 2019)

That’s not the only way spending has affected consumers at the pharmacy. As a stand-alone category, spending on nonprescription drugs has risen by 12.7% too.

Additionally, spending on therapeutic appliances and equipment has risen by 12.6%. That’s led by therapeutic medical equipment — such as hearing aids, prosthetics, wheelchairs and other products designed to support consumers — with an increase of 14.3%. Following that, spending on corrective eyeglasses and lenses has risen by 11.1%.

Spending for therapeutic appliances and equipment (2016 to 2019)

Separately, national health expenditure (NHE) estimates for medical equipment — which largely tracks the same products as those in the therapeutic appliances and equipment category — indicate that spending in this category has risen 12.7%. While it’s only a 10th of a percentage point difference, medical equipment spending is much higher than therapeutic appliance and equipment spending. In 2019, medical equipment spending was $152.8 billion, while therapeutic appliance and equipment spending was $72.0 billion.

Most of the discrepancy is due to how the BEA tracks each category. The BEA tracks therapeutic appliances through personal consumption expenditure (PCE) estimates, which includes receipts from optometrists. The NHE estimates, on the other hand, don’t include optometrists’ sales of optical goods and classifies optometrists’ services with other professional services.