A new report confirms concerns about healthcare costs, as it shows per-person spending is increasing faster than per-capita gross domestic product.
Between 2014 and 2018, per-person yearly spending, for those with employer-sponsored insurance, climbed from $4,987 to $5,892, an 18.4% increase, according to the 2018 Health Care Cost and Utilization Report released Thursday. The average annual rate of 4.3% outpaced growth in per-capita GDP, which increased at an average 3.4% over the same period.
There’s an exception from 2017 to 2018, when per-capita GDP grew slightly faster than healthcare spending per person.
The $5,892 total includes amounts paid for medical and pharmacy claims but does not subtract manufacturer rebates for prescription drugs.
Healthcare spending grew 4.4% in 2018, slightly above growth in 2017 of 4.2%, and the third consecutive year of growth above 4%.
After adjusting for inflation, spending rose by $610 per person between
2014 and 2018.
The cost estimates are consistent with National Health Expenditure data from the Centers for Medicare and Medicaid Services, the report said.
WHAT’S THE IMPACT
Higher prices for medical services were responsible for about three-quarters, 74%, of the spending increase above inflation. These increases were across all categories of outpatient and professional services.
Average prices grew 2.6% in 2018. While that is the lowest rate of growth over the period, consistent year-over-year increases mean that prices were 15% higher in 2018 than 2014.
The increase for outpatient visits and procedures was $87 in 2018, the largest annual increase between 2014 and 2018.
Average out-of-pocket price for ER visits increased more sharply than other subcategories of outpatient visits, though all saw an increase in the average amount for which patients were responsible
Professional service spending per person rose $86 in 2018, reflecting an acceleration in spending growth consistent with previous years’ trends, according to the report.
Inpatient services and prescription drugs also saw an increase in spending per person.
Inpatient admissions increased $24 in 2018, a smaller annual increase than in 2016 or 2017, but above the rise in 2015.
Per-person spending on prescription drugs rose $50, similar to increases in 2016 and 2017, but smaller than the rise in 2015. The total does not reflect manufacturer rebates.
On average, Americans with employer-sponsored insurance spent
$155 out-of-pocket on prescription drugs in 2018.
Prices rose, as did utilization, which grew 1.8% from 2017 to 2018, the fastest pace during the five-year period. And because of the higher price levels, the effect of the increase in utilization in 2018 on total spending was higher than it would have been in 2014.
Higher utilization may be the result of a population that got slightly older between 2014 and 2018. The population also became slightly more female.
People with job-based insurance saw their out-of-pocket costs rise by an average of 14.5%, or $114, between 2014 and 2018.
THE LARGER TREND
As most Americans have job-based health insurance, this data is critical for understanding overall health costs in the United States, the report said.
An estimated 49% of the U.S. population, about 160 million people, had employer-based health insurance in 2018, based on Census data.
The report combined data from large insurers, using 4,000 distinct
age/gender/geography combinations. It contains previously unreported information drawn from 2.5 billion insurance claims.
Claims data is the most comprehensive source of real-world evidence available to researchers as databases collect information on millions of doctors’ visits, healthcare procedures, prescriptions, and payments by insurers and patients, giving researchers large sample sizes, the report said.
After years of subsidizing Medicare Advantage (MA) plans in an effort to attract more insurers and beneficiaries to the market, the government has succeeded in its goal: the average beneficiary can now choose from 28 plans in 2020, and recent studies have shown MA plans are outperforming fee-for-service (FFS) Medicare on several key quality measures.
As shown above, this subsidy has decreased in recent years—as mandated by the Affordable Care Act—and per-beneficiary MA payments are roughly equal to those of FFS Medicare. (These numbers may be underreported, however, due to aggressive risk adjustment measures on the part of MA plans.) However, risk-adjusted average Medicare cost per MA beneficiary is actually 13 percent lower than per Medicare FFS beneficiary, due mainly to lower utilization of high-cost services and other efficiencies.
Insurers offering MA plans are profiting from this lucrative “spread.”
Growth in MA plans in recent years ensures that private insurers will continue to play an important role in the future of Medicare—the most recent projections estimate that 47 percent of Medicare beneficiaries will be in MA plans within a decade.
But inefficiencies in traditional Medicare may not make it the best standard on which to base MA payments. And ultimately, relative MA payment rates will have to continue to drop for the program to sustainably manage the healthcare costs of the gigantic Baby Boom generation.