New Marketplace

My Favorite Slide: Understanding the Growth of Health Care Spending

Infographic · January 30, 2018

Changes in household spending 1984-2014 health care spending

  Click To Enlarge.

This is one of my favorite slides because it shows to what extent health care costs have had an impact on the everyday life of Americans over the course of a generation. During the three decades from 1984 to 2014, many societal, economic, and environmental changes have occurred. After all, in 1984, we didn’t have the worldwide web, smartphones, or any of the benefits that the Internet has brought us. But we did have relatively inexpensive restaurants, clothing, and higher education. We also had significantly lower costs of care, and health spending was “only” 10% of the GDP.

Fast forward to 2014: health care consumes 8% of household spending — up 67% from less than 5%. At the same time, company-sponsored pensions disappeared, forcing households to save more for retirement and pushing money into 401(k) plans. That spending grew 24%, raising the household spend in that category to 10.7%, up from 8.6%. Of course, that came at the expense of other spending because, when all is said and done, something’s gotta give. It’s easy to guess what comes first for most: housing, transportation, food, personal insurance/pensions, and health care, in that order. But while the 3.2 point increase over 30 years may seem modest, the 67% growth rate of health care spending exceeds all other categories.

We often forget the wise statement from the late Uwe Reinhardt that households pay the entire health care bill of the United States, but this chart reminds us of that and its effect on the rest of the economy.

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