Private Insurance Spending Has Outpaced Public Spending Since 2016

Private insurance spending has grown faster than Medicare and Medicaid spending since 2016 even though enrollment and healthcare prices have plateaued.

By Thomas Beaton

October 08, 2018 - Private insurance spending has grown faster than Medicare and Medicaid spending since 2016, even though national enrollment has plateaued, says a new report from Altarum.

The report suggests that higher per-enrollee spending, plus generally excessive costs for private insurance, may be responsible for the nation’s chronically high health insurance price tag.  

Cumulative spending per beneficiary in the private sector has grown by more than 50 percent since 2009, while public payer spending per beneficiary has only grown by 15 percent.

“Our recent study of spending by payer type found that divergence in spending growth has been driven by both higher price growth and healthcare utilization and intensity within private insurance, compared to Medicaid and Medicare,” the report said.

Commercial insurance spending grew by 7.8 percent at the start of 2018 while cumulative public payer spending only grew by 2.3 percent.

After a spike in 2014 due to Medicaid expansion across many states, Medicaid spending growth fell to a rate of four percent in 2016 and has steadily decreased. Medicare spending growth has stayed below five percent in the last year.

The findings in the report suggest that private payers have not been able to contain healthcare costs even though the healthcare market has remained relatively stable.

The number of individuals with insurance has not grown by much during 2018, Altarum added. The number of uninsured individuals slightly decreased from 28.8 million in 2017 to 28.1 million in 2018, but the team believes that growth in insurance enrollment was not significant enough to contribute to rising private insurance costs.

National healthcare spending has stabilized for now, the team concluded, but private payers could face future instability from legal and political disruptions at the federal level.  

“Even if health spending growth remains at today’s moderate rate and economic growth continues to keep pace, future budgetary trade-offs will be painful,” the report said. “Policies that appear to have potential for near-term action such as surprise billings and out-of-pocket costs may provide some relief to consumers, but will do little to address long-term budgetary challenges.”

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