health care finance in the united states health care finance in the united states health care finance in the united states discusses how americans obtain and pay for their healthcare, and why u.s. healthcare costs are the highest in the world based on various measures. this article is part of a series onhealthcare reform in theunited states history debate legislation preceding social security amendments of 1965 emtala (1986) hipaa (1996) medicare modernization act (2003) psqia (2005) superseded affordable health care for america (h.r. 3962) america's affordable health choices (h.r. 3200) baucus health bill (s. 1796) proposed american health care act (2017) medicare for all act (2021, h.r. 1976) healthy americans act (2007, 2009) health security act (h.r. 3600) latest enacted affordable care act (h.r. 3590) health care and education reconciliation act (h.r. 4872) reforms obama administration proposals public opinion reform advocacy groups rationing insurance coverage systems free market health insurance exchange nationalized insurance publicly-funded single-payer canadian vs. american two-tier universal third-party payment models all-payer rate setting capitation fee-for-service global payment united states portal health care portal overview chart showing life expectancy at birth and health care spending per capita for oecd countries as of 2015. the u.s. is an outlier, with much higher spending but below average life expectancy. the american system is a mix of public and private insurance. the government provides insurance coverage for approximately 53 million elderly via medicare, 62 million lower-income persons via medicaid, and 15 million military veterans via the veteran's administration. about 178 million employed by companies receive subsidized health insurance through their employer, while 52 million other people directly purchase insurance either via the subsidized marketplace exchanges developed as part of the affordable care act or directly from insurers. the private sector delivers healthcare services, with the exception of the veteran's administration, where doctors are employed by the government. the centers for medicare and medicaid (cms) reported that u.s. health care costs rose 5.8% to reach $3.2 trillion in 2015, or $9,990 per person. as measured by cms, the share of the u.s. economy devoted to health care spending was 17.8% gdp in 2015, up from 17.4% in 2014. increases were driven by the coverage expansion that began in 2014 as a result of the affordable care act (i.e., more persons demanding healthcare or more healthcare units consumed) as well as higher healthcare prices per unit. u.s. healthcare costs are considerably higher than other countries as a share of gdp, among other measures. according to the oecd, u.s. healthcare costs in 2015 were 16.9% gdp, over 5% gdp higher than the next most expensive oecd country. a gap of 5% gdp represents $1 trillion, about $3,000 per person relative to the next most expensive country. in other words, the u.s. would have to cut healthcare costs by roughly one-third to be competitive with the next most expensive country. reasons for higher costs than other countries including higher administrative costs, spending more for the same services (i.e., higher prices per unit), receiving more medical care (units) per capita than other countries, cost variation across hospital regions without different results, higher levels of per-capita income, and less active government intervention to reduce costs. spending is highly concentrated among sicker patients. the institute of medicine reported in september 2012 that approximately $750b per year in u.s. health care costs are avoidable or wasted. this included: unnecessary services ($210 billion annually); inefficient delivery of care ($130 billion); excess administrative costs ($190 billion); inflated prices ($105 billion); prevention failures ($55 billion), and fraud ($75 billion). despite this spending, the quality of health care overall is low by oecd measures. the commonwealth fund ranked the united states last in the quality of health care among similar countries. the percentage of persons without health insurance (the "uninsured") fell from 13.3% in 2013 to 8.8% in 2016, due primarily to the affordable care act. the number uninsured fell from 41.8 million in 2013 to 28.0 million in 2016, a decline of 13.8 million. the number of persons with insurance (public or private) rose from 271.6 million in 2013 to 292.3 million in 2016, an increase of 20.7 million. in 2016, approximately 68% were covered by private plans, while 37% were covered by government plans; these do not add to 100% because some persons have both. among those whose employer pays for health insurance, the employee may be required to contribute part of the cost of this insurance, while the employer usually chooses the insurance company and, for large groups, negotiates with the insurance company. the government subsidizes the employer-based insurance by excluding premiums paid by employers from the employees income. this subsidy tax expenditure reduced federal tax revenue by $248 billion in 2013, or 1.5% gdp. the non-partisan congressional budget office (cbo) reported in march 2017 that healthcare cost inflation and an aging population are primary drivers of increasing budget deficits over time, as outlays (spending) continue to rise faster than revenues relative to gdp. cbo forecast that spending on major healthcare programs (including medicare and medicaid) would rise from 5.5% gdp in 2017 to 9.2% gdp by 2047. spending u.s. healthcare cost information, including rate of change, per-capita, and percent of gdp. as percentage of gdp the centers for medicare and medicaid (cms) reported that u.s. health care costs rose to 17.8% gdp in 2015, up from 17.4% in 2014. increases were driven by the coverage expansion that began in 2014 as a result of the affordable care act (i.e., more persons demanding healthcare or more healthcare units consumed) as well as higher healthcare prices per unit. u.s. healthcare costs are considerably higher than other countries as a share of gdp, among other measures. according to the oecd, u.s. healthcare costs in 2015 were 16.9% gdp, over 5% gdp higher than the next most expensive oecd country. a gap of 5% gdp represents $1 trillion, about $3,000 per person relative to the next most expensive country. in other words, the u.s. would have to cut healthcare costs by roughly one-third ($1 trillion or $3,000 per person on average) to be competitive with the next most expensive country. per capita the centers for medicare and medicaid (cms) reported that u.s. health care costs rose 5.8% to reach $3.2 trillion in 2015, or $9,990 per person. the office of the actuary (oact) of the centers for medicare and medicaid services publishes data on total health care spending in the united states, including both historical levels and future projections. in 2007, the u.s. spent $2.26 trillion on health care, or $7,439 per person, up from $2.1 trillion, or $7,026 per capita, the previous year. spending in 2006 represented 16% of gdp, an increase of 6.7% over 2004 spending. growth in spending is projected to average 6.7% annually over the period 2007 through 2017. in 2009, the united states federal, state and local governments, corporations and individuals, together spent $2.5 trillion, $8,047 per person, on health care. this amount represented 17.3% of the gdp, up from 16.2% in 2008. health insurance costs are rising faster than wages or inflation, and medical causes were cited by about half of bankruptcy filers in the united states in 2001. rate of increase further information: health care prices in the united states the centers for medicare and medicaid services reported in 2013 that the rate of increase in annual healthcare costs has fallen since 2002. however, costs relative to gdp and per capita continue to rise. per capita cost increases have averaged 5.4% since 2000. according to federal reserve data, healthcare annual inflation rates have declined in recent decades: 1970-1979: 7.8% 1980-1989: 8.3% 1990-1999: 5.3% 2000-2009: 4.1% 2010-2016: 3.0% while this inflation rate has declined, it has generally remained above the rate of economic growth, resulting in a steady increase of health expenditures relative to gdp from 6% in 1970 to nearly 18% in 2015. health care cost rise in the u.s. relative to other countries, as measured by total expenditure on health as percent of gdp. relative to other countries u.s. healthcare costs in 2015 were 16.9% gdp according to the oecd, over 5% gdp higher than the next most expensive oecd country. with u.s. gdp of $19 trillion, healthcare costs were about $3.2 trillion, or about $10,000 per person in a country of 320 million people. a gap of 5% gdp represents $1 trillion, about $3,000 per person relative to the next most expensive country. in other words, the u.s. would have to cut healthcare costs by roughly one-third to be competitive with the next most expensive country. one analysis of international spending levels in the year 2000 found that while the u.s. spends more on health care than other countries in the organisation for economic co-operation and development (oecd), the use of health care services in the u.s. is below the oecd median by most measures. the authors of the study concluded that the prices paid for health care services are much higher in the u.s. concentration spending is highly concentrated among a relatively few patients. the kaiser family foundation reported that the concentration of health care spending in the u.s. in 2010 was as follows: the top 1% of persons accounted for 21% of health care spending; the top 5% accounted for 50%; the top 20% accounted for 82%; and the bottom 50% of persons accounted for only 3% of spending. other studies have found similar results using ahrq analysis. relative to the overall population, those who remained in the top 10% of spenders between 2008 and 2009 were more likely to be in fair or poor health, elderly, female, non-hispanic whites and those with public-only coverage. those who remained in the bottom half of spenders were more likely to be in excellent health, children and young adults, men, hispanics, and the uninsured. these patterns were stable through the 1970s and 1980s, and some data suggest that they may have been typical of the early-to-mid 20th century as well. an earlier study by ahrq found that a significant persistence in the level of health care spending from year to year. of the 1% of the population with the highest health care spending in 2002, 24.3% maintained their ranking in the top 1% in 2003. of the 5% with the highest spending in 2002, 34% maintained that ranking in 2003. individuals over age 45 were disproportionately represented among those who were in the top decile of spending for both years. seniors spend, on average, far more on health care costs than either working-age adults or children. the pattern of spending by age was stable for most ages from 1987 through 2004, with the exception of spending for seniors age 85 and over. spending for this group grew less rapidly than that of other groups over this period. the 2008 edition of the dartmouth atlas of health care found that providing medicare beneficiaries with severe chronic illnesses with more intense health care in the last two years of life—increased spending, more tests, more procedures and longer hospital stays—is not associated with better patient outcomes. there are significant geographic variations in the level of care provided to chronically ill patients, only 4% of which are explained by differences in the number of severely ill people in an area. most of the differences are explained by differences in the amount of "supply-sensitive" care available in an area. acute hospital care accounts for over half (55%) of the spending for medicare beneficiaries in the last two years of life, and differences in the volume of services provided is more significant than differences in price. the researchers found no evidence of "substitution" of care, where increased use of hospital care would reduce outpatient spending (or vice versa). distribution of spending by service type healthcare spending in the u.s. was distributed as follows by type of service in 2014: hospital care 32%; physician and clinical services 20%; prescription drugs 10%; and all other, including many categories individually making up less than 7% of spending. these first three categories accounted for 62% of spending. this distribution is relatively stable; in 2008, 31% went to hospital care, 21% to physician/clinical services, 10% to pharmaceuticals, 4% to dental, 6% to nursing homes, 3% to home health care, 3% for other retail products, 3% for government public health activities, 7% to administrative costs,