Spending on health care in the United States is facing unprecedented public scrutiny. Cast into the spotlight by the intense debate that surrounded the passage of the Affordable Care Act (ACA) in March 2010, the cost of health care has since become a focal point of related debates over government spending, entitlement reform, and ways to reduce the federal deficit. The United States spends more on health care, both per capita and as a share of GDP, than any other country in the world. In 2009, spending on health care reached a record high $2.5 trillion, or 17.6 percent of U.S. GDP.

While record spending on health care is dominating headlines, the health care industry is in a state of flux. Stakeholders across the health care sector are running hard to prepare for implementation of the ACA, while simultaneously dealing with the effects of the worst recession since the Great Depression.

The latest report from the McKinsey Center for U.S. Health System Reform sheds light on the underlying dynamics and trends shaping the health care industry in this period of rapid change and uncertainty. The research builds on the 2008 MGI report, Accounting for the cost of US health care: A new look at why Americans spend more, and examines trends in health care spending, both overall and by category of care. It also compares health care expenditures in the United States to those in other economically developed countries, accounting for differences in wealth.

A few notable findings include:

Health care spending reached record levels in 2009, both in absolute terms and as a share of GDP. Total spending exceeded expected levels—based on spending patterns in other developed countries and adjusting for wealth—by approximately $570 billion. This amounted to 23 percent of total spending on health care that year.
While health care spending has grown faster than the economy as a whole, growth rates have hit historical lows. Spending grew more slowly between 2008 and 2010 than at any other point since 1960.
The recession of 2008–2009 contributed to this slowdown, further reducing growth in utilization and spending. Where previous recessions have tended to have a delayed effect on spending, the effects of the recent economic downturn were more immediate.
Growth in health care spending has varied considerably across different categories of care, with the strongest growth in outpatient care and long-term and home care. Spending on inpatient care, pharmaceuticals, and health administration and insurance, meanwhile, slowed markedly between 2006 and 2009.

The report focuses on the period between 2006 and 2009, with an early look at U.S. spending levels in 2010. Focusing on this three-year window allows us to examine the impact of the recession as well as the forces shaping the health care landscape leading to implementation of the ACA. The report provides a baseline on health care spending, pre-reform, and a fact-base to support informed decision making by industry leaders and policy makers.

Download the full report (PDF–3.23 MB)

For more on the report’s findings, view the slide show below.