Key Facts About Hospitals and National Hospital Spending
This analysis presents key facts to inform policy discussions about hospitals and hospital spending in the following categories: National Hospital Spending, The Hospital Industry, Rural Hospitals, Use of Hospital Care, Out-of-Pocket Spending and Medical Debt, Hospital Prices, Hospital Finances and Charity Care. Hospitals account for nearly one third (31%) of total health care spending—$1.5 trillion in 2023—with expenditures projected to rise rapidly through 2032, contributing to higher costs for families, employers, Medicare, Medicaid, and other public payers.
National Spending on Hospital Care
Spending on hospital care was the single largest source of national health expenditures in 2023. Hospital care includes both inpatient services and outpatient services (like imaging services or surgical procedures that do not require an overnight stay). Other categories that account for a large share of national health expenditures include spending on physician and clinical services (20%) and retail prescription drugs (9%).
As shown in the data below, private health insurance accounted for more than a third of spending on hospital care in 2023 (37%), followed by Medicare (25%) and Medicaid (19%).
| Category | Percentage of Spending |
|---|---|
| Private Health Insurance | 37% |
| Medicare | 25% |
| Medicaid | 19% |
| Physician and Clinical Services (Total health expenditures) | 20% |
| Retail Prescription Drugs (Total health expenditures) | 9% |
Private insurance includes coverage offered by employers and insurance purchased through the Affordable Care Act (ACA) health insurance Marketplaces and elsewhere. Medicare spending—which is financed by the federal government—includes hospital care provided to beneficiaries.
Policy Discussions and the Hospital Industry
In the past, policymakers have looked to reduce spending on hospital care as part of broader efforts to make health care more affordable and reduce the federal deficit and national debt. For example, Republican lawmakers recently floated a number of proposals that could directly or indirectly affect the more than 6,000 hospitals across the country, including:
- Major reductions in Medicaid spending.
- Reductions in Medicare spending for uncompensated care and bad debt.
- Establishing site-neutral payments that would achieve Medicare savings by aligning payment rates for a given service across different sites of care.
- Eliminating federal tax-exempt status for nonprofit hospitals.
Tradeoffs and Financial Vulnerability
Reducing federal spending on hospital care would inevitably involve tradeoffs. On the one hand, doing so could reduce the federal deficit, help offset the cost of a tax bill or other policy priorities, and promote efficiencies. Some options that reduce Medicare reimbursement may also lead to lower beneficiary cost-sharing requirements and premiums.
On the other hand, reducing federal payments to hospitals could shift costs onto patients and lead hospitals to offer fewer services—which may result in patients not getting need care—or poorer quality of care. Absorbing reductions in federal spending could be especially challenging for hospitals that are financially vulnerable, such as rural and safety-net hospitals.
Rural Hospitals and Charity Care
This analysis presents key facts about hospitals to inform policy discussions, specifically regarding rural hospitals and hospital finances. Topics include prevalence of rural hospitals, rural hospital characteristics, rural profit margins, and rural openings and closings. Furthermore, it addresses hospital finances including profit margins, tax exemption, the 340B Drug Pricing Program, hospital expenses, and charity care distribution. The federal government subsidizes private insurance through favorable tax treatment for employer-sponsored coverage and through subsidies for coverage purchased through the Marketplaces.