The Nation’s Health Care Hierarchy and Cost in 2011

In a country of more than 311,000,000, the burdens placed on the health care system are both enormous and complex as Americans expect a fundamental right to first rate health care without much regard for its cost. The Federal Government, however, is mindful of this expense, and since 1964 the United States Department of Health and Human Services (HHS) has published an annual series of data presenting total health expenditures in the United States.

Health Care Spending

Identified as National Health Expenditure Accounts (NHEA), these estimates attempt to measure the total annual dollar amount of our nation’s health care consumption. The information also tries to identify the amount invested in the future of health care (such as medical structures, equipment, research, etc.). Some of the more significant expense categories monitored by the NHEA include:

  • Hospital Care: This includes all services provided by hospitals to patients (room and board, ancillary charges, resident physicians, pharmacy, etc.), measured by total net revenue.
  • Physician and Clinical Services: This includes services provided by Doctors of Medicine (M.D.) and Doctors of Osteopathy (D.O.), outpatient care, and some laboratory expenses. It also includes the professional component of hospital charges if these charges are usually billed separately.
  • Other Professional Services: This includes professional services by private nurses, chiropractors, podiatrists, optometrists, and physical/occupational/speech therapists.
  • Dental Services: This includes Doctors of Dental Medicine (D.M.D.), Doctors of Dental Surgery (D.D.S.), or Doctors of Dental Science (D.D.Sc.).
  • Other Health, Residential, and Personal Care: This includes care provided in residential care facilities, ambulance services, and workplace health care services, among others.
  • Home Health Care: This includes health care provided in freestanding home health agencies (HHAs).
  • Nursing Care Facilities: This includes freestanding nursing home facilities that provide both nursing and rehabilitative services.
  • Prescription Drugs: This includes the retail side of medication.
  • Durable Medical Equipment: This includes in part the retail side of certain items such as surgical and orthopedic products, wheelchairs, eyeglasses, and hearing aids.
  • Other Non-Durable Medical Products: This includes the retail side of non-prescription drugs and medical supplies.
  • Population: The NHEA uses a modification of U.S. Census figures.
  • Out-of-Pocket Payments: This includes direct spending by consumers for all health care goods and services, including any amounts not covered by insurance (such as co-payments and deductibles, but not insurance premiums).
  • Health Insurance: This includes private health insurance, Medicare, Medicaid, and other such public payers.
  • Private Health Insurance: This includes premiums paid to insurance companies, as well as the costs for advertising, sales commissions, rate credits, taxes, profits, etc.

Growth in U.S. National Health Expenditures (NHE)  over the next ten years is expected to be slightly higher due to the Patient Protection and Affordable Care Act (PPACA), as well as other issues. Average annual growth in NHE for 2009 through 2019 is expected to be 6.3 percent (0.2 percentage point faster than pre-reform estimates).  NHE as a portion of the nation’s Gross Domestic Product (GDP) is expected to be 19.6 percent by 2019 (or 0.3 percentage point higher than projected before reform). Incidentally, PPACA is expected to result in a lower average annual Medicare spending growth rate for 2012 through 2019 (6.2 percent). This is 1.3 percentage points lower than pre-reform estimates.

For comparison purposes, the following information was compiled for 2009:

  • NHE grew 4.0% to $2.5 trillion, or $8,086 per person, and accounted for 17.6% of GDP.
  • Medicare spending grew 7.9% to $502.3 billion, or 20 percent of total NHE.
  • Medicaid spending grew 9.0% to $373.9 billion, or 15 percent of total NHE.
  • Private health insurance spending grew 1.3% to $801.2 billion, or 32 percent of total NHE.
  • Out of pocket spending grew 0.4% to $299.3 billion, or 12 percent of total NHE.
  • Hospital expenditures grew 5.1% in 2009.
  • Physician and clinical services expenditures grew 4.0%.
  • Prescription drug spending increased 5.3%.

Health Care Oversight

To understand the scope of issues health care must face on any given day, it is important to become familiar with the building blocks that make up today’s health care hierarchy.Who is responsible for oversight?  At the top of the health care pyramid is the nation’s President, Barack Obama.  Underneath the President lies a complex organization of individuals and agencies at both the federal and state level, who make up the gargantuan structure commonly referred to as health care.  The President directly oversees the Office of the Secretary, HHS.  HHS has multiple operating divisions, including:

HHS staff divisions include:

The Food and Drug Administration is another important agency under HHS. Protecting and promoting public health, the FDA consists of nine centers/offices, including:

Accreditation and Certification

Due to the sensitive nature of their services, hospitals must exist in a heavily regulated industry, and the Federal government is only part of the overall health care regulatory equation.  Accreditation, certification and periodic review come from a variety of both public and private sources, though the goal is generally consistent:  develop uniform standards to ensure that hospitals in the United States all operate at an acceptable safety level and deliver quality patient care in an appropriate and effective manner.

Any one healthcare institution can be subject to accreditation review at any time from entities such as the Joint CommissionHealthcare Facilities Accreditation Program (HFAP), Community Health Accreditation ProgramAccreditation Commission for Health CareThe Compliance Team, or Healthcare Quality Association on Accreditation (HQAA). In October 2008, CMS approved DNV Healthcare as a third national accreditation program for hospitals seeking to participate in the Medicare program. Recently, hospitals accredited through DNV Healthcare have been added to the American Hospital Association (AHA) Guide, listing these facilities as well as those accredited by the Joint Commission and HFAP.

Each program or department is governed by its own set of rules.  For example, Joint Commission surveys hospitals by following more than 276 standards, reviewing 1,612 elements of performance.  HFAP does largely the same thing, pursuant to its 1,100 or more individual standards.  Focusing on durable medical equipment (DME), HQAA has developed its own review process, and “vows to continuously strive to set standards of the highest quality on behalf of the DME industry and business owners.”  Indeed, HQAA “listen[s] . . . act[s] . . . [and] stand[s] together and in unison to bring the whole of DME service and provision to the next level.”

There are numerous other entities participating in the certification/accreditation process, and virtually every facet of the health care system is governed and reviewed by multiple organizations.  Take the American Hospital Association, which designs and administers Certification Programs to recognize mastery of well-defined bodies of knowledge within health care management disciplines.  The Certification Commission for Healthcare Information Technology is a recognized certification body for electronic health records and their networks.  Even educational programs, general education or specialty education (such as podiatric medicine) must receive proper accreditation in a hospital setting.


In addition to the list above, every hospital is subject to special regulations from its own state.  Health care facilities in California are licensed, regulated, inspected, and/or certified by a number of public and private agencies at both the state and federal level, including the California Department of Public Health (CDPH).

State and federal agencies have separate jurisdictions, but there is overlap.  For example, CDPH’s License and Certification Division (“L&C”) is responsible for ensuring that hospitals comply with state law, but it also cooperates with CMS to verify that facilities accepting Medicare and Medi-Cal (Medi-Cal is California’s version of Medicaid) payments meet federal requirements.  California’s Office of Statewide Health Planning and Development (OSHPD) regulates hospital construction and administers programs which endeavor to implement the vision of “Equitable Healthcare Accessibility for California.”

These two examples serve to emphasize as well as outline the complexities of state regulations that often accompany their federal counterparts.  CDPH is divided into eight separate programs, including:

  • Office of the Director, or State Public Health Officer;
  • External Affairs;
  • Policy and Programs;
  • Center for Chronic Disease and Health Promotion;
  • Center for Environmental Health;
  • Center for Family Health;
  • Center for Health Care Quality; and
  • Center for Infectious Disease.

Like CDPH, OSHPD is one of 13 departments within California’s Health and Human Services Agency.  Made up of six separate boards and commissions, OSHPD’s mission is “to promote healthcare accessibility through leadership in analyzing California’s healthcare infrastructure, promoting a diverse and competent healthcare workforce, providing information about healthcare outcomes, assuring the safety of buildings used in providing healthcare, insuring loans to encourage the development of healthcare facilities, and facilitating development of sustained capacity for communities to address local healthcare issues.”

In the present climate of health care reform, things do change fast. The foundation that makes up the nation’s health care hierarchy, however, may take some time to understand.