Although overall healthcare cost inflation remains relatively small, healthcare spending just passed 18 percent of the nation’s gross domestic product at the end of 2015. Because of the size of healthcare as a component of the nation’s expenditures, this continued increase in spending is unsustainable and threatens our economy.
While hospital spending makes up the largest slice of healthcare spending at 32 percent of all healthcare expenditures, drug costs have risen as a component and now account for 20 percent of that total. In addition, for all categories of healthcare spending tracked by the Alatarum Institute’s Center for Sustainable Health Spending, drug costs increased at the fastest rate, rising 12.1 percent from November 2014 to November 2015.
Many factors lead to this increased spending on pharmaceuticals. One is that the use of prescription drugs has grown dramatically. A recent article by Elizabeth Kantor in the Journal of the American Medical Association documented the increase in medication use from 51 percent of U.S. adults in 1999-2000 to 58 percent in 2011-2012. In addition, Kantor reported that polypharmacy—the use of five or more drugs—rose from 8.2 percent of U.S. adults to 15 percent over that same period.