Wealthy countries, including the U.S., tend to spend more per person on health care and related expenses than lower-income countries. However, even among higher-income countries, the U.S. spends far more per person on health.
Spending Growth
Over the past five decades, the health spending gap between the U.S. and peer nations has widened. In 1970, the U.S. spent about 7% of its GDP on health, which was similar to spending in several comparable countries (the average of comparably wealthy countries was about 5% of GDP in 1970). The U.S. was relatively on pace with other countries until the 1980s, when health spending in the U.S. grew at a significantly faster rate relative to its GDP.
The United States spends more per capita on total health expenditures, including government spending and household payments. In 2020, the U.S. spent 19.5% of its GDP on health consumption (up from 17.5% in 2019), largely due to the increased spending during the COVID-19 pandemic, along with the economic downturn. By 2023, health spending as a share of GDP had declined to 17.6% in the U.S.—but remains substantially higher than in peer countries.
Drivers of Health Spending
The largest category of health spending in both the U.S. and comparable countries is spending on inpatient and outpatient care, which includes payments to hospitals, clinics, and physicians for services and fees such as primary care or specialist visits, surgical care, provider-administered medications, and facility fees. Americans spent $8,353 per person on inpatient and outpatient care, compared to $3,636 in peer countries, on average. The U.S.’s higher spending on providers is driven more by higher prices than higher utilization of care. Patients in the U.S. have shorter average hospital stays and fewer physician visits per capita, while many hospital procedures have been shown to have higher prices in the U.S. Higher spending on inpatient and outpatient care drives most of the difference in health spending between the U.S. and its peers. In fact, the U.S. spends more on inpatient and outpatient care than most peer nations spend on their entire health systems (including long-term care, prescription drugs, administration, prevention, and other services).
The cost of prescription drugs is another factor that partially explains the U.S.’s higher health spending. Many of the same medications cost more in the U.S. than they do in other comparable nations. In 2022, the U.S. spent $1,765 per capita on prescription drugs and other medical goods (including over-the-counter and clinically delivered pharmaceuticals as well as durable and non-durable medical equipment). However, because prescription drugs represent a relatively small share of total health spending, even if per capita prescription drug spending in the U.S. were closer to that of comparable countries, that would make only a small dent in closing the gap on health spending.
Spending on health administration is similarly much higher in the U.S. than in comparable countries: $1,078.44 per capita. Administrative costs include spending on running governmental health programs and overhead from insurers, but exclude administrative expenditures from health care providers. This includes administrative spending for private health insurance, governmental health programs (such as Medicaid and Medicare), as well as other third-party payers and programs.
The U.S. also spends more per capita on preventive care than peer nations. Activities captured in this spending category vary among countries, but in the U.S., it generally consists of public health activities, including preventive health programs and education for immunizations, disease detection, emergency preparedness, and more. In the U.S., preventive care spending more than doubled between 2019 and 2020, from $343 to $741 per capita, but subsequently declined to $649 by 2022.
Meanwhile, the only category of spending in which the U.S. spends less than most comparable countries on a per-person basis is long-term care. Long-term care spending includes health and social services provided in long-term care institutions such as nursing homes as well as home- and community-based settings. After an increase from 2019 to 2020 at the onset of the COVID-19 pandemic, U.S. spending on long-term care declined by 4.9% between 2020 and 2021 but increased again by 5.4% between 2021 and 2022. Long-term care spending was already lower in the U.S. than in peer countries before the pandemic.
