Health Care Spending in 2001: What the Study Found

Published February 1, 2003

Hospital Care

Hospital spending in 2001 reached more than $451 billion. Between 1999 and 2000, the quantity of services used per patient increased by 2.2 percent; between 2000 and 2001, the rate of increase was 4.2 percent. Spending on hospital care accounted for 30 percent of the overall spending increase in 2001.

Physicians and Clinical Services

Spending on physician and clinical services increased 8.6 percent to $314 billion in 2001. The increase was similar to trends in the early 1990s. Increases in the use of high-tech imaging procedures and physician visits are other reasons for the spending increase.


Medicare spending increased 7.8 percent in 2001, to $242 billion, versus a 6 percent increase in 2000. Medicare spending on managed care plans fell in 2001, as some plans withdrew from the program or limited their participation. For example, a 10 percent decrease in Medicare+Choice enrollment contributed to a 3.8 percent drop in capitated payments.


Spending on Medicaid ballooned 10.8 percent in 2001 to $224.3 billion, the sharpest increase since 1993. This was driven partly by the economic recession, which helped increase enrollment due to job loss. Further, increased use of Medicaid’s upper payment limit, the so-called “Medicaid loophole,” encouraged states to liberalize eligibility requirements, contributing to the significant growth.

Prescription Drugs

Spending on prescription drugs increased more rapidly than spending on other categories of health services in 2001, up 15.7 percent to $140.6 billion. This represents the first time drug spending surpassed expenses for nursing homes and home health care combined. The rate of increase was slower than in previous years.

Source: Katharine Levit et al., “Trends in U.S. Health Care Spending, 2001,” Health Affairs, Volume 22, No. 1, January/February 2003.