Per Capita Healthcare Costs

I think a lot of people simply don’t understand where all the money goes in healthcare. New research† fleshes out the lifetime costs (in 2000 dollar real terms, but not in present value).

The estimates are $361K for women, and $269K for men. About 40% of that difference can be attributed to women’s greater longevity, while the other 60% is presumably pregnancy related.

We tend to blame a lot of those costs on prescription drugs. Not so: about 15% of lifetime healthcare expenses are for drugs.

Where’s the rest of the money go?

Roughly 45% goes to staying in facilities: hospitals, nursing homes, rehabilitation centers, and long-term care institutions.

About 30% goes to acute care in hospitals (that does not include the costs of staying there, and being provided with routine/chronic care).

Roughly 25% goes to service professionals, like doctors and nurses.

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There’s a really good takeaway here. Think about how much it costs to stay in a hotel or vacation rental.

Here’s my personal experience. I stay in a nice hotel with a big discount when I go to Salt Lake City (I stay at the University Guest House at the parents’ rate). The cost of a decent hotel room (in which we have slept three) is about $120/night. My mortgage is about $60/day. From that, I conclude that a hotel, for most people, is roughly twice as expensive as a home. That’s just a ballpark figure, but my guess is that it’s fair to say that, for most people, staying away from home costs twice as much or thereabouts.

Here’s the thing: nursing homes, rehab centers, hospitals, and institutions are basically hotels with extra expensive services. This is where most of America’s healthcare dollars are going.

On the other hand, if you’ve ever cared for someone at home … you’ve probably at least contemplated that those care facilities are a pretty good deal.

P.S. Just for BB: the lifetime costs of dental care are about $31K.

† The source article is “The Lifetime Distribution of Health Care Costs,” by Alamayehu and Warner, in Health Services Research.