The Hidden Costs of U.S. Health Care: Consumer Discretionary Health Care Spending

Analysis of direct and indirect out-of-pocket costs to consumers


In 2010, total U.S. health-related expenditures were an estimated $3.2 trillion or 23.9 percent higher than reported in the National Health Expenditure Accounts (NHEA). This translates to $10,392 per person.

An additional $621 billion in direct and indirect costs was estimated for goods and services above what is captured in NHEA accounting. Of this additional amount, $492 billion (79 percent) is the imputed value of unpaid supervisory care given to individuals by family or friends.

The hidden costs of U.S. health care: Consumer discretionary health care spending. a study by the Deloitte Center for Health Solutions, estimates U.S. health-related spending by taking a broad view of direct and indirect costs as well as items such as alternative medicines, functional foods, and the imputed cost of supervisory care.

The study reveals that:

  • U.S. consumers purchase a wide variety of alternative and supplemental health products and services; functional foods, vitamins, minerals, supplements, and Complementary and Alternative Medicine (CAM) practitioners account for 83 percent of the direct out-of-pocket (OOP) costs not captured in NHEA categories. This suggests opportunities for the retail sector, health plans, and health care providers to develop a competitive range of products and services.
  • Higher expenditures relative to income fall on Seniors, two-person families, and low-income families. Continued population-driven growth in the utilization of health care services such as hospitals, physicians and clinical services, long-term care, and supervisory care is expected; this is expected to challenge the health care sector to develop specialized clinical and community-based care services for the aged as well as innovative approaches to providing and funding long-term care. In addition, the financial implications of supervisory care may be considerable for both employers and consumers.
  • OOP direct costs may be a considerable burden on the average household. Consumer price sensitivity about the cost of health care is likely to rise as more of the burden is borne by the consumer through OOP spending. Also, rising costs may induce consumers to avoid or defer care, potentially leading to poorer health and more expensive outcomes in the future. Innovative financial tools and products may be needed to assist consumers in anticipating and better managing costs when making health care decisions.

Policy-makers and industry stakeholders should be sensitive to and address the intended and unintended consequence of direct and indirect health costs. Explicit efforts should be made to inform consumers about their OOP exposure for traditional purchases. In addition, attention to models and policies that support appropriate supervisory care services for lower-income households is necessary; policy-makers and employers should innovate around programs that reduce workplace absences and lost income for employees adversely impacted by this added responsibility. Finally, the government should capture and report the full impact of direct and indirect OOP costs.