Harris Meyer December 05, 2019
Per capita
spending on healthcare increased by 4% in 2018, up from 3.5% the year before, as faster growth in medical
prices more than offset slower growth in the use and intensity of healthcare
goods and services, according to the new annual report by the CMS Office of the
Actuary.
The medical price
growth of 2.1%, up from 1.3% in 2017, was the fastest since 2011, though it was
slower than the average annual rate of 3.4% from 2004 to 2007, according to
the report published Thursday by Health Affairs.
In another
notable finding, the net cost of private health insurance grew 15.3% in 2018,
up from 9.5% in 2017, the biggest increase since 2003. The actuaries said this
was driven largely by the temporary reinstatement of the Affordable Care Act's
health insurance tax, which was suspended by Congress this year.
That could give a
boost to lobbying efforts by health insurers and employer groups to abolish the
tax.
Total healthcare
spending growth ticked up 4.6% to hit $3.6 trillion in 2018, compared with 4.2%
in 2017. Healthcare consumed 17.7% of gross domestic product, compared with
17.9% the year before. Earlier this year, the CMS actuaries projected that healthcare's share of GDP will rise to
19.4% of GDP in 2027.
"However,
economic growth outpaced healthcare spending and the share of the economy
devoted to healthcare fell," said Micah Hartman, a statistician in the
Office of the Actuary who was the lead author of the study.
But other
observers argued that healthcare spending growth remains too high, with
inflation-adjusted growth of 2.5% only slightly behind GDP growth of 2.9%. They
say that while efforts by payers and providers to control costs may have
moderated spending increases, there is still a long way to go to make
healthcare affordable and worth the money.
"I suppose
it's a good sign that healthcare's percentage of total GDP dropped. It's not
squeezing out as much spending on other things, but it's still squeezing out a
lot," said Steve Wojcik, vice president of public policy for the National
Business Group on Health.
"There is
ample evidence we're still not getting the value from the healthcare system
that we ought to in terms of improvements in health outcomes, given how much
we're spending," said Katherine Baicker, dean of the University of Chicago
Harris School of Public Policy. "Nothing in that story has changed."
Spending on
hospital care, which accounted for 33% of total spending in 2018, grew 4.7% to
reach $1.2 trillion in 2018, slightly up from 4.5% the year before. Hospital
prices increased 2.4%, compared with 1.7% in 2017, while growth in inpatient
days was slower than in 2017—0.7% versus 1.7%.
Expenditures for
physician and clinical services decelerated from 4.7% in 2017 to 4.1% last
year, even though prices rose 0.7% in 2018.
Spending on
retail prescription drugs—not including drugs administered in physicians'
offices and hospitals—rose 2.5% to $335 billion in 2018, compared with 1.4% the
year before. The actuaries said increased spending on new oncology and
auto-immune drugs was partly offset by a 1% decline in price growth and a
continued increase in use of generic drugs.
Despite the
increase in use of generics, most prescription spending continued to go to
brand-name drugs. The brand-name share of spending rose from 76.7% to 78.7% in
2018.
Total and
per-enrollee insurance spending increased across private plans, Medicare, and
Medicaid from 2017 to 2018.
Private insurance
spending rose 5.8% to $1.2 trillion, from 4.9%. Per-member growth was 6.7%, up
from 4.7%.
Medicare spending
increased 6.4% to $750 billion, up from 4.2%. The per-enrollee increase was
3.7%, compared with 1.6% the year before.
Federal and state
Medicaid spending edged by 3% to $597 billion, up from 2.6%. Per-enrollee
growth was 2%, up from 1.2% the year before. Spending increases were moderated
by a slowdown in enrollment growth and slower rate increases for Medicaid
managed care.
The number of
uninsured Americans grew by 1 million for the second year in a row, reaching
30.7 million in 2018. As part of that, private health insurance enrollment
dipped by 0.8% in 2018 due to declines in enrollment in individual plans and
employer-sponsored plans.
The actuaries
said individual plan enrollment decreased by 1.4 million as average premiums
rose. Enrollment in employer plans dipped by 0.2% as employees facing higher
premium contributions increasingly turned down coverage.
The increase in
the number of uninsured people may have contributed to slowed growth in use and
intensity of healthcare services, the actuaries said.
But it also
boosted healthcare costs for everyone else, as providers shifted the
uncompensated care costs to paying patients.
"The fact
that 30 million Americans are uninsured means someone has to pay for their
care, and that falls on the 300 million who have insurance," said Gerard
Anderson, a health policy professor at Johns Hopkins University.
Wojcik said
employer efforts to reduce costs through value-based programs such as
accountable care organizations, centers of excellence, and high-performing
networks may have contributed to keeping total healthcare spending growth under
5% last year.
But his
organization's members fear they won't be able to hold the line due to
increasing market consolidation by hospitals and physicians. "Our members
expect 2019 data will show continued acceleration of spending on hospital
care," he said.
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