Health Spending

What’s the issue?  

By 2028, health care spending in the United States is expected to comprise nearly 20 percent of the gross domestic product (GDP), according to the Centers for Medicare & Medicaid Services, up from about 13 percent of GDP in the year 2000. 

The current rate of health spending is unsustainable. That’s why it’s important to examine new ways to optimize health care spending in the United States by looking at all parts of the health care system that impact patient care.  

At its core, particularly when it comes to primary care, vaccines and other public health issues, health spending is an investment, both in the benefit citizens receive from a therapy today and the potential benefits of tomorrow’s cures.  

A Key Challenge: Fostering Sustained, Research-First Dialogue 

One key step is to ask tough questions about what spending should be prioritized and what should not, to better manage costs. Critical questions include: where could spending be reduced so that we can spend more in other areas with greater benefit? How might those assessments be done, and how should choices be made? Addressing these questions requires both a frank, evidence-based understanding of the underlying issues and a thoughtful dialogue.  

In recent years, there’s been an increase in finger-pointing at various health care sectors and debates driven by soundbites. There’s also been an increased focus on aggregate numbers and inexact comparisons to spending in other countries, rather than fully understanding how the U.S. health care system is interconnected and the drivers behind specific spending trends. Without that understanding, it could mean the wrong areas of health spending are being targeted and could result in poor policy decisions. 

What are stakeholders doing to address health spending?  

There are a number of different approaches that stakeholders are taking to address health care spending. Some approaches are more evidence-based than others.

Addressing Low-Value Care

One area most stakeholders agree on is reducing low-value care. These are treatments and services that are inefficient, increase costs and have little or no benefit for patients (or even cause harm in some cases).

Making Trade-Offs

Many stakeholders, especially state governments, have limited budgets and must decide how best to allocate scarce health care dollars. Studies have found that allocating health spending in a more targeted way, such as taking disease burden and prevalence into account, could offer better benefits for patients. In addition, the trade-offs stakeholders make on health care spending could mean spending less on education, infrastructure or other potential priorities.

Using Creative Financing Mechanisms

Some states are testing different approaches to paying for health care, particularly for curative therapies. These include risk-based arrangements, subscription models or multi-payer risk pools, among other approaches. 

Participating in Dialogues

As a sponsor of Health Affairs’ Considering Health Spending series, NPC recognizes the importance of having a broader dialogue. The series, which has spurred more than 100 articles and blogs, is an important way to bring different stakeholders together in conversation and dig deeper into health spending drivers.  

NPC also has brought together stakeholders through the Going Below The Surface Forum, a group of more than 20 partners across the health care sector who are interested in tackling health spending challenges.  

To date, the group has held webinars, developed a Roadmap to Address Low-value Care and hosted regional town hall meetings and salon discussions to foster constructive conversations focused on solutions.

What might be working? 

Instead of cost-containment strategies that are sector-based, policymakers should consider a more holistic and evidence-based approach, looking for ways to ensure the best health outcomes, while having the smallest potential to create unintended harm.

Learn more about these important health spending topics.