National Health Care
National health expenditures increased to $1,092.4
billion, or 13.5 percent of the U.S. Gross Domestic Product
(GDP), in 1997, up from $247.3 billion, or 8.9 percent of GDP, in
The growth rate of national health expenditures has
been slower during the 1990s than it was in previous decades.
National health expenditures grew at an average annual rate of
6.6 percent from 1990 through 1997, compared with a rate of 10.5
percent from 1960 to 1970, 12.9 percent from 1970 to 1980, and
11.0 percent from 1980 to 1990.
In 1997, total government expenditures on health care
were $507.1 billion (46 percent of national health expenditures).
The federal government spent $367.0 billion (34 percent of total
expenditures) on health care, while state and local governments
spent $140.0 billion (13 percent). The impact of the Medicare and
Medicaid programs on government spending, particularly on federal
government spending, is evident when 1997 expenditures are
compared with those of 1960. In 1960, total government
expenditures were $6.6 billion, with the federal government
spending $2.9 billion and state and local governments spending
Funds from private sources accounted for $585.3 billion
(54 percent of total health spending) in 1997. In 1960, private
expenditures accounted for 75 percent of national health
expenditures, and in 1970 they amounted to 62 percent. From 1980
to 1997, private funds decreased from 57 percent to 54 percent of
total national health expenditures.
Insurance payments of $348.0 billion represented the
largest portion of private expenditures for health care in 1997.
Direct out-of-pocket payments by individuals for health care
amounted to $187.6 billion. Out-of-pocket payments declined from
49 percent of total expenditures in 1960 to 17 percent in 1997,
and private insurance payments increased from 22 percent to 32
percent of total health expenditures over the same period.
In 1997, 97 percent of health care spending went to
health services and supplies; the remaining 3 percent was for
research and construction expenses. Personal health care
spending, including all goods and services received directly by
patients, amounted to $969.0 billionthe largest component
of health services and supplies.
Hospital care was the single greatest personal health
care expense, representing $371.1 billion in 1997, a 2.9 percent
increase over 1996. Physicians' services were the second largest
component of personal health care, accounting for $217.6 billion
in 1997, a 4.4 percent increase over 1996. Physicians' services
and hospital care together accounted for 54 percent of total
national health expenditures in 1997.
One of the fastest-growing components of national
health expenditures is prescription drugs. In 1960, prescription
drugs accounted for 1.0 percent of total national health
expenditures ($2.7 billion). By 1997, that percentage had
increased to 7.2 percent ($78.9 billion). The average annual
growth rate of expenditures on prescriptions drugs increased from
10.0 percent in 1994 to 14.1 percent in 1997.
For more information, call Ken McDonnell, (202) 775-6342.
Source: EBRI Databook on Employee Benefits, Fourth
edition, 1997, and