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U.S. Annual Healthcare Spending Is A Stunning $3.4 Trillion, Says Study

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As part of ongoing research into national healthcare spending, the Deloitte Center For Health Solutions recently published their findings based on health data from 2012. According to the new report, there's an additional amount of healthcare consumer spending that isn't included in the federal calculations (often referred to as the National Healthcare Expenditure or just NHE). The new Deloitte calculations represent out‒of‒pocket expenses by consumers and amount to an additional $672 billion for 2012.  By Deloitte's accounting, this additional amount puts the NHE for 2012 at $3.46 trillion.

These increases are expected to continue as employers shift to high-deductible offerings and individuals gain coverage through insurance marketplaces. The annually reported national estimates do not tell the whole story. Deloitte’s Center for Health Solutions has analyzed data from the Medicare Expenditure Panel Survey and other sources to develop a more complete picture of resources going to health care, including the out‒of‒pocket costs incurred by consumers. Dig Deep ‒ Impacts and Implications of Rising Out‒of‒Pocket Health Care Costs ‒ Deloitte Center For Health Solutions

The Deloitte study suggests that the federal definition of out-of-pocket doesn't include multiple direct costs to consumers and the largest single category of "imputed indirect costs associated with supervisory care." In other words, the additional costs that consumers spend every years either directly or as caregivers for family members or friends with an illness. Deloitte believes these two categories combined equals $672 billion which should be added to the NHE figures.

Deloitte used this chart to help identify the additional out-of-pocket expenses and their relation to the NHE.

According to Deloitte, about $530 billion is assigned to a single category they call imputed indirect costs associated with supervisory care. The balance ‒ about $142 billion ‒ is further divided into 5 separate categories.

  • $63 billion ‒ Nutrition/supplements
  • $33 billion ‒ Complimentary & Alternative Medicine
  • $20 billion ‒ All other ambulatory
  • $20 billion ‒ Homes for the elderly
  • $6 billion ‒ Other

Other key takeaways from the report:

A growing number of individuals are buying health plans that have lower premiums (so are less expensive on a monthly basis) but have high deductibles, without understanding that these plans will not pay for a doctor visit or for prescription drugs before the consumers meet their annual deductible.

Health plans are a primary originator of product designs that incorporate higher cost-sharing for consumers. These organizations are responding to employer requests to use cost-sharing to keep premium costs down and incorporate ACA actuarial equivalent requirements that dictate fairly significant cost-sharing.

The burden of rising OOP pharmaceutical costs is increasingly falling on patients, especially ones enrolled in the less expensive Bronze or Silver marketplace insurance plans, which typically have lower monthly costs but higher deductibles.

While hospitals should benefit from reductions in the percentage of uninsured individuals, they may see continued prevalence of high deductibles in people with employer and marketplace coverage.

Using Deloitte figures and a conservative growth rate of 4%, the total estimated NHE for subsequent years would also be significantly higher as well.

  • 2012: $3.46 trillion (Deloitte baseline)
  • 2013: $3.59 trillion (+4%)
  • 2014: $3.74 trillion (+4%)
  • 2015: $3.89 trillion (+4%)

One of the lead authors of the study summarized her view this way:

One of the most interesting aspects of this study was the relative and significant increase in out-of-pocket health related expenses that consumers will continue to see. It is quickly becoming a driver of health spending growth for most consumers  and we see this continuing to increase in the foreseeable future.  Sarah Thomas, MS  Research Director at Deloitte Center for Health Solutions

The NHE is always a controversial number, but as more healthcare costs are shifted directly to consumers, it's equally important to count all of these costs accurately. While this version of Deloitte's report was released earlier this month, it reflects a continuing commitment by Deloitte which issued a similar study in 2012 (using 2010 data). The 2012 report was titled The Hidden Costs Of U.S. Healthcare: Consumer Discretionary Healthcare Spending. Deloitte calculated the additive consumer healthcare spending for 2012 at $621 billion. The new report released earlier this month reflects a two year increase of about $52 billion just for consumer out-of-pocket spending.