American
households spent $1 trillion on health care in 2018
Total national health
expenditures rose by 4.6 percent last year, reaching $3.6 trillion in 2018,
according to a new report from the Centers for Medicare
and Medicaid Services’ Office of the Actuary published in Health Affairs. The
increase in total expenditures was fueled primarily by a tax on private and
federal insurance providers, causing a surge in the net cost of insurance as
Americans’ household spending surpassed $1 trillion.
The $1.2 trillion
spent on private health insurance — a third of all health spending in 2018 —
came even as enrollment declined slightly from the year before, with net cost
rising by its fastest rate since 2003. Consequently, spending on private insurance
per enrollee grew at its fastest rate since 2004, rising from $5,813 to $6,199
over the course of one year.
CMS officials were
quick to emphasize the impact of the reinstated health insurance tax, an annual
fee established by the Affordable Care Act levied on insurers based on their
premiums.
“We don’t have an
explicit measure of the direct impact of the tax, but we do have the estimates
from the IRS in terms of expenditure amount,” said Aaron Catlin, co-author of
the study and deputy director at the National Health Statistics Group. “The
health insurance tax was big enough to account for most of the acceleration and
had a big impact on the three largest payers.”
The Internal Revenue
Service’s estimate of the tax in 2018 was $14.3 billion, up from $11.3 billion
in 2015 and 2016, the authors said. The tax was not implemented in 2017, and
lawmakers have passed another moratorium for 2019.
American households
contributed nearly $1.04 trillion in total health spending in 2018, in the form
of expenses like out-of-pocket costs, contributions to Medicare via payroll
taxes and premiums and cost-sharing for employer-sponsored coverage.
While the burden of
out-of-pocket costs — especially for retail prescription drugs, durable medical
equipment and dental services — grew last year, private businesses also
contributed to larger shares of workers’ premiums. As a result, spending by
private businesses grew by 6.2 percent, the highest rate of increase since
2003.
On retail
prescription drugs, spending accelerated by about 2.5 percent, reaching $335
billion in 2018. (That total does not include physician-administered drugs,
which fall under hospital services.) Though the authors found a decline in
price increases and expanded use of lower-cost generic medications, those
savings were not enough to fully offset higher spending on new drugs in the
oncology and auto-immune space.
According to Joseph
Benson, co-author of the report and an economist in the CMS Office of the
Actuary, CMS has not reported a decline in retail prescription drug spending
since 1973.
Spending on hospital
care, which accounts for 33 percent of spending, increased at the same rate as
2017 despite an uptick in prices, because of reduced use and intensity of
services. This trend was reflected throughout the report: While prices grew for
most health care services, growth in the use of those services slowed, as the
uninsured population grew by 1 million people for the second year in a row and
reached 30.7 million.
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