Total health expenditure

According to the latest available data from the CMS, national health expenditure has increased from 1960 to 2025. Several factors have contributed to this upward trend. First, studies have found a strong correlation between wealth and healthcare spending. Additionally, developed economies, such as the United States, typically spend more on healthcare because medical and technological advancements occur fairly rapidly to address various disabilities and health-related issues. Finally, inefficient medical care delivery systems and financing, increasing insurance coverage and lower out-of-pocket expenses all serve to increase medical cost inflation, which raises expenditure levels.

Additionally, healthcare reform has also importantly influenced total health expenditure. The major outcome of the Patient Protection and Affordable Care Act (PPACA) of 2010 is that almost all individuals are required to have health insurance coverage or face a penalty tax. To facilitate this, the PPACA established health insurance exchanges, which certify the value of health insurance plans and provide a web-portal for individuals and small businesses to compare plans. The exchanges are also used to determine if individuals qualify for tax credits for private insurance or programs like the Children's Health Insurance Program (CHIP).

Individuals can purchase nongroup health insurance from these exchanges, while small employers can buy insurance from small-group exchanges, which will help them lower their health insurance costs. Low-income individuals who participate in the exchanges will receive a tax credit to offset the cost of premiums. However, the Supreme Court ruled that states can refuse the expansion of Medicaid provided for under the PPACA. As subsidies are granted to individuals earning between $11,700 and $46,700 annually, individuals earning less than $11,700 who live in states without expanded coverage will most likely remain without health insurance.

The onset of the COVID-19 (coronavirus) pandemic caused an increase in total health expenditure. The highly transmissible and deadly virus caused those infected to seek immediate medical attention, often lasting for weeks and months. As a result, it is estimated that total health expenditure to increase 10.6% in 2020. The availability of vaccines and boosters to combat the coronavirus increase in 2021, allowing for less hospitalization in the event of infection. However, lasting effects of the coronavirus are still being discovered. These conditions often necessitate additional medication or hospitalization. A significant increase in total health expenditure is forecast to occur in 2022 as federal public health funding increases, in part due to offsets in expiring COVID-19 funding. Over the five years to 2025, total health expenditure is estimated to increase at an annualized 5.6% to $5.4 trillion.