Health Care Spending: Where Does the Money Go?

According to findings by AHIP, a national association whose members provide health care coverage and services, here's how every dollar spent on health care is allocated:

• Hospitals: 40.7 cents, including inpatient, outpatient and emergency room costs: 
  • Emergency Room Costs: 3.2 cents go to ER visits, including payments to physicians, facility costs and ambulance transport.
  • Inpatient Hospital Costs: 17.6 cents is for services, including for the administration of prescription drugs and payments to physicians and facilities.
  • Outpatient Hospital Costs: 19.9 cents for physician and facility non-drug related payments for treatment.

• Prescription Drugs: 24.2 cents for outpatient prescription drugs and those administered in physician’s offices or clinics.
• Doctor Visits: 11.6 cents for payments to doctors and clinics for all non-drug-related outpatient services.
• Ambulatory Surgery, Labs and Other Outpatient Care: 7.1 cents for all outpatient services incurred outside hospitals, doctor offices and clinics.
• Other Costs: The remaining 16.4 cents cover non-drug-related outpatient services, administrative expenses and other overhead.
  • Administrative Expenses: A small portion of this amount is used for claim adjustment appeals, fraud and abuse prevention, case management and management of provider and prescription drug networks.
  • Quality Improvement: Less than one penny is aimed at reducing hospital readmissions, promoting wellness, improving patient safety and enhancing health information technology.

This breakdown highlights why many employers are turning to level-funded plans, like Allied National’s Funding Advantage, which provides detailed reports on plan utilization. These reports help employers understand where their health plan dollars are going, unlike many fully insured plans that are reluctant to share claims data.

​Level-funded plans offer the insight needed to make annual adjustments based on plan utilization. 

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Allied National​
​Founded in 1970, Allied is one of the nation's oldest and most experienced third-party administrators. As the small group benefit experts, Allied works with small business employers to provide unique and affordable group health benefits.