“Exhibit 1 decomposes health care spending in 2017 by type of expenditure. In this breakdown, health spending can go towards investment or HCE [Health Consumption Expenditures]. Investment accounted for $167.6 billion (or 4.8 percent of total health spending). The remainder went to the HCE category, which CMS divides into spending on personal health care, government public health activities, government administration, and the net cost of health insurance.

“The bulk of the HCE category is made up of personal health care spending, which was $2,961 billion or 84.9 percent of total health spending in 2017. The four main categories of personal health care spending are hospital care ($1,142.6 billion or 32.7 percent of total health spending), physician services ($544.2 billion or 15.6 percent), clinical services ($150.1 billion or 4.3 percent), and prescription drugs ($333.4 billion or 9.5 percent).2,3 Also included in personal health care spending are spending on nursing care facilities ($166.3 billion or 4.8 percent of total health spending), home health care ($97.0 billion or 2.8 percent), and other services ($527.3 billion or 15.1 percent).

“The remainder of HCE includes spending on government public health activities ($88.9 billion or 2.5 percent of total health spending) and government administration ($45.0 billion or 1.3 percent). It also includes the net cost of health insurance which is the difference between incurred premiums for insurance and the amount paid for benefits (i.e. what insurance companies have left over after benefits are paid). In 2017, the net cost of health insurance was $229.5 billion or 6.6 percent of total health spending.

“For all the HCE categories, the shares of total spending in 2017 are all within half a percentage point of the shares in 2016 (see Rama, 2018 for 2016 values). This suggests that 2016 spending growth among categories was similar. In fact, the shares in Exhibit 1 have remained stable over the past 25 years. Kane (2017) notes that the biggest percentage point change over this period was for prescription drugs, which accounted for 5.6 percent of total health spending in 1990 but has remained at or above 9 percent since 2001.”

Source: Apoorva Rama, National Health Expenditures, 2017: The slowdown in spending growth continues, AMA Policy Research Perspectives, American Medical Association, 2019. https://www.ama-assn.org/about/research/trends-health-care-spending