January 1999

National Health Care Expenditures, 1997

• National health expenditures increased to $1,092.4 billion, or 13.5 percent of the U.S. Gross Domestic Product (GDP), in 1997, up from $247.3 billion, or 8.9 percent of GDP, in 1980.

• The growth rate of national health expenditures has been slower during the 1990s than it was in previous decades. National health expenditures grew at an average annual rate of 6.6 percent from 1990 through 1997, compared with a rate of 10.5 percent from 1960 to 1970, 12.9 percent from 1970 to 1980, and 11.0 percent from 1980 to 1990.

• In 1997, total government expenditures on health care were $507.1 billion (46 percent of national health expenditures). The federal government spent $367.0 billion (34 percent of total expenditures) on health care, while state and local governments spent $140.0 billion (13 percent). The impact of the Medicare and Medicaid programs on government spending, particularly on federal government spending, is evident when 1997 expenditures are compared with those of 1960. In 1960, total government expenditures were $6.6 billion, with the federal government spending $2.9 billion and state and local governments spending $3.7 billion.

• Funds from private sources accounted for $585.3 billion (54 percent of total health spending) in 1997. In 1960, private expenditures accounted for 75 percent of national health expenditures, and in 1970 they amounted to 62 percent. From 1980 to 1997, private funds decreased from 57 percent to 54 percent of total national health expenditures.

• Insurance payments of $348.0 billion represented the largest portion of private expenditures for health care in 1997. Direct out-of-pocket payments by individuals for health care amounted to $187.6 billion. Out-of-pocket payments declined from 49 percent of total expenditures in 1960 to 17 percent in 1997, and private insurance payments increased from 22 percent to 32 percent of total health expenditures over the same period.

• In 1997, 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 $969.0 billion—the largest component of health services and supplies.

• Hospital care was the single greatest personal health care expense, representing $371.1 billion in 1997, a 2.9 percent increase over 1996. Physicians' services were the second largest component of personal health care, accounting for $217.6 billion in 1997, a 4.4 percent increase over 1996. Physicians' services and hospital care together accounted for 54 percent of total national health expenditures in 1997.

• One of the fastest-growing components of national health expenditures is prescription drugs. In 1960, prescription drugs accounted for 1.0 percent of total national health expenditures ($2.7 billion). By 1997, that percentage had increased to 7.2 percent ($78.9 billion). The average annual growth rate of expenditures on prescriptions drugs increased from 10.0 percent in 1994 to 14.1 percent in 1997.

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

Source: EBRI Databook on Employee Benefits, Fourth edition, 1997, and www.hcfa.gov/stats/nhe%2Doact/tables/tablist.htm