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March 1997

National Health Care Expenditures, 1995

National health expenditures reached $988.5 billion in 1995, or 13.6 percent of the U. S. Gross Domestic Product (GDP), from $247.2 billion, or 8.9 percent of GDP, in 1980. National health expenditures are projected to increase to $1,481.7 billion by 2000 (15.9 percent of GDP) and to $2,173.7 billion (17.9 percent of GDP) by 2005.

In the 1990s, the growth rate of national health expenditures has slowed, declining from 9.2 percent in 1991 to 5.1 percent in 1994. The growth rate showed a slight increase to 5.5 percent in 1995.

In 1995, total government expenditures on health care were $456.4 billion (46 percent of national health expenditures). The federal government spent $328.4 billion (33 percent of total expenditures) on health care, while state and local governments contributed $128.0 billion (13 percent). The impact of the Medicare and Medicaid programs on government spending, particularly on federal government spending, is evident when comparing 1995 spending with 1960 spending. In 1960, total government health expenditures were $6.6 billion, with the federal government spending $2.7 billion and state and local governments spending $3.7 billion.

Private sources of funds accounted for $532.1 billion (54 percent of total health spending) in 1995. In 1960, private expenditures accounted for 75 percent of national health expenditures, compared with 62 percent in 1970. From 1980 to 1995, private sources of funds decreased from 57 percent to 54 percent of total national health expenditures.

Payments through insurance companies of $310.6 billion were the largest portion of private expenditures for health care in 1995. Direct out-of-pocket payments for health care amounted to $182.6 billion. Out-of-pocket payments declined from 49 percent of total expenditures in 1960 to 19 percent in 1995, and private insurance payments increased from 22 percent to 31 percent of total health expenditures over the same period.

In 1995, 97 percent of health care spending went to health services and supplies; the remaining 3 percent was for research and construction expenses. Personal health care spending, including all goods and services received directly by patients, amounted to $878.8 billion -- the largest component of health services and supplies.

Hospital care is the single greatest personal health care expense, representing $350.1 billion in 1995, a 4.5 percent increase over 1994. Physicians' services were the second largest component of personal health care, accounting for $201.6 billion in 1995, a 5.8 percent increase over 1994. Physicians' services and hospital care together accounted for 56 percent of total national health expenditures in 1995.

One of the fastest growing components of national health expenditures is expenditures for long-term care. In 1960, long-term care accounted for 3.3 percent of total national health expenditures. By 1995, that percentage had increased to 10.8 percent. Out-of-pocket sources continue to be the largest source of funds for long-term care expenditures, yet the percentage of long-term care expenditures accounted for by out-of-pocket sources declined from 40.4 percent in 1990 to 32.5 percent in 1995. The Medicaid program accounted for an increasing share of long-term care expenditures, rising from 7.3 percent in 1990 to 17.8 percent in 1995.

For more information, call Ken McDonnell, (202) 775-6342.

Source: EBRI Databook on Employee Benefits, Fourth edition, forthcoming 1997.