Federal government31%
$1.7T · Medicare, Medicaid, subsidies, public healthTHE UNITED STATES · CALENDAR YEAR 2024
One health dollar.
Three different stories.
Who ultimately finances care, which program pays the claim, and where the money lands are three separate questions. This map shows all three—then lays out the R&D engine underneath them.
NATIONAL HEALTH EXPENDITURES$5.3T
$15,474per person
18.0%of GDP
01
Who puts it in.
THE NATIONAL CASH-FLOW MAP
Who puts it in.
Where it comes out.
In 2024, households, businesses, and governments financed $5.3 trillion of U.S. health spending. The ribbons below merge those ultimate funders into the national pool, then fan the same pool out by what the money purchased.
READ LEFT → RIGHTFinancing → national pool → spending
CASH INUltimate sponsors
Households28%
$1.5T · premiums, payroll taxes, direct paymentsPrivate businesses18%
$967B · mostly employer-sponsored coverageState + local16%
$860B · Medicaid, public employees, public healthOther private revenue6%
Philanthropy, investment income, other revenue
NATIONAL HEALTH
EXPENDITURES $5.3T 2024 · $15,474 per person
EXPENDITURES $5.3T 2024 · $15,474 per person
CASH OUTWhat the money purchased
Hospital care31%
$1.635TPhysician + clinical21%
$1.110TRetail prescriptions9%
$467BAdministration + insurance7%
Government administration + non-medical insuranceNursing + home health7%
$389B combinedDental + other professionals8%
$374B combined · share roundedResidential + personal care6%
$321BMedical products4%
$215B · durable + non-durablePublic health3%
Population-level government activitiesInvestment5%
Structures, equipment + noncommercial researchTHE MIDDLE LAYER
Who processed or paid the spending?
This is a second accounting view—not a cross-tab between a specific sponsor and provider.
Private insurance 31%Medicare 21%Medicaid 17%Out of pocket 11%Other third party 8%VA / DOD / CHIP 4%Public health 3%Investment 5%
The center pool is deliberate.
CMS publishes sponsor, payment-channel, and service totals as different ledgers. The national pool joins cash in to cash out without inventing unsupported household-to-hospital or government-to-drug cross-flows.
02
Same system.
FOUR COMMON PAYMENT ROUTES
Same system.
Different paths.
Household + employerpremiumPrivate insuranceallowed claimProvider
The patient may see a premium, deductible, and copay; the employer contribution sits outside the medical bill.
Household + federal revenuetax + premiumMedicareprogram paymentProvider or plan
“Medicare paid” names the channel, while beneficiary and federal financing sit upstream.
Federal + state revenuepublic fundingMedicaidclaim or capitationProvider or plan
A managed-care capitation payment transfers responsibility for covered care; it is not a claim for one specific service.
Householdcash priceOut of pocketdirect paymentDental practice
The shortest route. Provider revenue then pays labor, supplies, facilities, and other operating costs.
03
Claims are the main river.
THE FLOWS A SIMPLE CLAIM MISSES
Claims are the main river.
Not the whole watershed.
Premiums are not provider revenue.
Premiums first enter an insurance pool. Claims, reserves, quality programs, taxes, and administrative costs leave that pool on different schedules.
Product and rebate flows run opposite ways.
A medicine moves manufacturer → wholesaler → pharmacy → patient. Contracted discounts and rebates can move back through a PBM or plan. Public data do not expose one universal split.
Revenue is not profit.
Provider receipts support labor, drugs and supplies, facilities, technology, debt service, administration, uncompensated care, and any remaining margin.
Investment lives inside NHE too.
The national total includes structures, equipment, and noncommercial research. It is not limited to medical claims or personal healthcare.
Government can be sponsor, payer, regulator, and buyer.
Those are different roles. Medicare pays claims; federal revenues finance much of the program; FDA regulates products; agencies also fund research and purchase care.
Today’s revenue can fund tomorrow’s care.
Operating cash, retained earnings, grants, philanthropy, licensing, and investment capital can be recycled into clinical studies, new facilities, and product development.
04
Discovery is funded in layers.
THE R&D ENGINE
Discovery is funded in layers.
Risk gets handed forward.
There is no single “U.S. healthcare R&D total.” Public budgets, university expenditures, and company R&D surveys answer different questions and overlap. Read these as three windows—not a sum.
NIH appropriation
$35.3B was awarded as extramural research grants. The balance supported contracts, intramural research, administration, and other activities.
University health + biomedical R&D
$38.5B in health sciences plus $20.8B in biological and biomedical sciences. This includes federal dollars, so it overlaps NIH and other agency funding.
Pharma R&D performed in the U.S.
$114.2B was paid for by the companies themselves and $11.8B by outside funders. Survey scope excludes companies with fewer than 10 domestic employees.
Why these cannot be added:
NIH dollars often become university expenditures; business surveys classify by the company performing the work; calendar years and fiscal years differ; and “health sciences,” “biomedical,” and “pharmaceutical” are not identical boundaries.
ALL STAGES AT ONCE
The R&D conveyor
Read left to right within each row: a scientific question attracts a different capital mix, buys specific work, and either produces a handoff or a reason to stop. Drug development is shown because its gates are visible; diagnostics, devices, procedures, software, and public-health interventions follow different paths.
| Stage + question | Common capital | Money buys | Handoff if it works | Stop signal |
|---|---|---|---|---|
| 01DiscoveryIs the biology real? | Public grants · universities · philanthropy · biotech · pharma | Scientists · datasets · assays · screening · model systems · medicinal chemistry | Grant → license or spinout → seed / venture funding | Target will not reproduce, is unsafe, or cannot become a practical product |
| 02PreclinicalCan it reach the body safely? | Biotech · pharma · venture capital · translational grants | Chemistry · toxicology · animal studies · dosing · formulation · early manufacturing | IND package → permission to begin human trials | Toxicity, poor exposure, unstable formulation, or a manufacturing dead end |
| 03Phase IWhat dose is tolerated? | Sponsor cash · venture capital · public-market capital · partner funding | Clinical sites · participants · labs · safety monitoring · pharmacokinetics | Dose + safety range → proof-of-concept study | Unacceptable toxicity or too little usable exposure |
| 04Phase IIDoes it help patients? | Biotech · pharma · investors · licensing partners · nonprofits | Recruitment · endpoints · biomarkers · dose finding · statistics | Proof of concept → partnership or pivotal-trial capital | No efficacy signal, wrong dose, or an endpoint that cannot show value |
| 05Phase IIIIs benefit–risk confirmed? | Large biotech · pharma · public markets · debt · commercial partners | Large trial networks · comparators · manufacturing scale-up · quality systems | Pivotal evidence → regulatory application | Missed endpoint, safety imbalance, or inconsistent production |
| 06Review + scaleDo evidence and factory pass? | Sponsor balance sheet · commercial partners | Submission · regulatory review · inspections · quality · inventory · launch | Approval → coverage, contracting, and clinical adoption | Complete-response letter, failed inspection, or inadequate evidence |
| 07Post-marketHow does it perform in use? | Product revenue · sponsor · payers · public programs | Safety surveillance · registries · real-world evidence · confirmatory trials | Label expansion + lessons fed back to the next portfolio | New harms, failed confirmatory study, restrictions, or withdrawal |
THE CLINICAL FILTER
100 enter.
About 12 emerge.
CBO reports that only about 12% of drugs entering clinical trials are ultimately approved. The other 88 may fail for safety, efficacy, strategy, financing, manufacturing, or commercial reasons.
APPROVEDSTOPPED, FAILED, OR WITHDRAWN
APPROX. APPROVED12out of 100 clinical entrants
CBO says development often takes a decade or more. Spending today and approvals this year belong to different cohorts.
CBO’s wide range includes failed programs and the opportunity cost of capital—not only cash spent on one successful molecule.
34 new molecular entities and 12 biologics; 23 had orphan-drug designation. A count does not measure comparative clinical value.
WHAT STEERS THE PORTFOLIO?
Need matters. So do tractability and expected return.
Can the mechanism be measured, changed, manufactured, and tested with a credible endpoint?
Disease burden, unmet need, severity, and the size and accessibility of a trial population shape priority.
Anticipated price, eligible population, duration of treatment, competition, coverage, and global demand shape private investment.
Grants, tax policy, patents, exclusivity, regulation, public purchasing, and advance commitments can change risk and expected return.
R&D spending is an input, not a health outcome.
More spending can fund better science, more shots on goal, expensive failures, incremental products, or duplicative work. Approval counts also miss comparative benefit, access, adoption, safety after launch, and whether a product improves population health.
THE SYSTEM IN ONE PASS
Financing
Households, businesses, and governments ultimately fund the system.
Pooling
Insurers and public programs collect money, define benefits, and pay claims.
Delivery
Hospitals and clinicians receive most spending; products, long-term care, public health, administration, and investment receive the rest.
Renewal
Public science, academic research, philanthropy, and private capital absorb risk at different stages of innovation.
Healthcare is not one market. It is a stack of financing, insurance, delivery, product, research, and policy systems sharing the same patient.
05
Different ledgers.
SOURCES + BOUNDARIES
Different ledgers.
Named and dated.
CMS National Health Expenditure Accounts
Official U.S. totals by sponsor, source of funds, and type of service. The page uses the 2024 historical release and its rounded shares.
Historical NHE tables ↗ NHE fact sheet ↗ Nation’s health dollar ↗National Institutes of Health
Actual appropriation and extramural award totals. Research project-grant application success rates are separate from product-development success.
FY 2025 by the numbers ↗NCSES Higher Education R&D Survey
University expenditures by field and funder. Health sciences and biological/biomedical sciences are shown as distinct fields.
FY 2024 higher education R&D ↗NCSES Business Enterprise R&D Survey
Domestic R&D performed by pharmaceutical and medicine companies, separated by company and outside funding.
Business R&D overview ↗ Industry table ↗Congressional Budget Office
Clinical-entry approval rate, development time, cost-estimate range, and the public/private incentive structure.
Pharmaceutical R&D report ↗Food and Drug Administration
CDER’s calendar-year novel-drug count and classifications. This does not include every device, biologic, diagnostic, or new use.
2025 novel drug approvals ↗
Scope:
This is a national accounting and innovation map, not medical or insurance advice. Figures use the latest complete official release available for each ledger as of August 2026; years differ because publication calendars differ. Values are nominal dollars unless noted. Contract-level pharmacy and insurer flows are described without invented percentages because terms vary and are often confidential.
large idea. ↗