What is Driving U.S. Health Care Spending

This paper by the Bipartisan Policy Center explores the factors that are driving the level of spending on health care in the United States.  According to the Centers for Medicare and Medicaid Services (CMS) American health spending will reach nearly $5 trillion, or 20 percent of gross domestic product (GDP), by 2021. Therefore, it is important for policy-makers and other stakeholders to understand and offer solutions to the high level of spending on health care in the United States.

The authors explore factors that are driving current levels of spending on health care, including:

  • Fee-for-service reimbursement;
  • Fragmentation in care delivery;
  • Administrative burden on providers, payers and patients;
  • Population aging, rising rates of chronic disease and co-morbidities, as well as lifestyle factors and personal health choices;
  • Advances in medical technology;
  • Tax treatment of health insurance;
  • Insurance benefit design;
  • Lack of transparency about cost and quality, compounded by limited data, to inform consumer choice;
  • Cultural biases that influence care utilization;
  • Changing trends in health care market consolidation and competition for providers and insurers;
  • High unit prices of medical services;
  • The health care legal and regulatory environment, including current medical malpractice and fraud and abuse laws; and
  • Structure and supply of the health professional workforce, including scope of practice restrictions, trends in clinical specialization, and patient access to providers.

The authors conclude that the drivers of health care cost growth are complex and multifaceted and no single driver is responsible for the nation's high and rising health care costs. Likewise, no single policy solution will be adequate to meet this challenge. For this reason, the Bipartisan Policy Center's Health Care Cost Containment Initiative plans to produce a comprehensive, bipartisan package of health care cost containment options that, if implemented together, could reduce systemwide health care costs, slow cost growth and improve the efficiency and quality of care in the United States.