Expenditures by Function

VI. Key Issues: Financing and Delivery >> A.  Health Spending >> Health Expenditure Patterns >> Expenditures by Function (last updated 12.9.15)

Overview

The Centers for Medicare and Medicaid Services maintains historical and projected estimates of total health expenditures broken down by personal health expenditures (hospitals, doctors etc.), public health, health-related research and construction and administration, broken down by source of funds.

Personal Health Expenditures

• National Health Expenditure Accounts–provide aggregate historical and projected national estimates of personal health expenditures, by type of service.
• Medical Expenditure Panel Survey. MEPS is a set of large-scale surveys of families and individuals, their medical providers, and employers across the United States. MEPS is the most complete source of data on the cost and use of health care and health insurance coverage.  This individual-level data allows for very fine-grained analyses of how health spending varies by demographic and family characteristics such as income.

Public Health

• National Health Expenditure Accounts–provide aggregate historical and projected national estimates of public health spending broken down by source of funds (federal, state/local).
• Shortchanging America’s Health: A State-by-State Look at How Public Health Dollars Are Spent (2010). This report from the Trust for America’s Health (TFAH) and the Robert Wood Johnson Foundation (RWJF) shows that state funding for public health ranged dramatically across the country, from a low of $3.55 per person in Nevada to a high of $169.92 per person in Hawaii. The national median is $28.92 per person. The structure of state and local health departments varies from state to state, with some states relying more on local funds.

Research/Construction

• National Health Expenditure Accounts–provide aggregate historical and projected national estimates of health-related research/construction spending broken down by source of funds (federal, state/local, private).
• PhRMA. Private and Public R&D Spending (1995-2009). Shows that total pharma spending on R&D in 2009 was more than double the amount of total R&D spending by National Institutes of Health (NIH).
• Rate of Return on Biomedical Research.
  • According to CEA Registry, a June 2014 paper in BMC Medicine quantified the returns of public and charitable funded cancer research in the UK. Matthew Glover et. al. estimated the benefits of a defined set of cancer-related interventions from 1991-2010. Interventions included prevention, screening, and treatment. In the base case, authors estimated a “substantial” 10.1% internal rate of return (IRR) for these research funds.
  • A 2008 report used a similar method to examine the returns of research related to cardiovascular disease, in which they found a similar estimated IRR of 9%.

Administration

• National Health Expenditure Accounts–provide aggregate historical and projected national estimates of administrative costs of public health programs (Medicare/Medicaid) and private health insurers broken down by source of funds (federal, state/local, private). This compilation does not provide a breakdown of administrative costs borne by providers, as these costs are embedded in aggregate spending for services such as physicians and hospital care.
• Ronald J. Vogel and Roger Blair. An Analysis of Medicare Administrative Costs. This is a very old article, but provides a very fine-grained examination of the components of administrative costs related to Medicare.
• Kenneth Thorpe. Inside the black box of administrative costs. Health Affairs, 11, no.2 (1992):41-55. This too is somewhat dated, but provides a rigorous comparison of administrative costs for public and private health insurance to better understand differences in costs across payers by type and size.