CMS’ View of 2015 National Health Spending

Last week we reported on the HCCI report on 2015 employer-sponsored insurance spending trends; this week we have the latest work on the CMS’ Office of the Actuary on national health spending in 2015.   (HA Article)   As a nation we spent $3.2 trillion on health in 2015, a 5.8% increase, compared to a 5.3% rise in 2014.  On a per capita basis this was $9,990, or a 5% rise, compared to 4.4% per capita growth in 2014.  17.8% of GDP now goes to health care.  This is the fastest rate of growth in several years and far outpaces economic growth, inflation and most importantly, personal income increases.  Much of the spending growth over the last two years is attributed to the soon-to-be deceased reform law’s expansion of coverage.  This expansion purportedly led to more spending on private health insurance and Medicaid members.

Private health insurance spending, at a gross $1.07 trillion, rose 7.2%, mostly due to greater hospital and physician services, to $5433 per enrollee.  In 2014 private insurance spending rose 5.8%.  Medicare spending rose 4.5% to $646.2, and the rise was down slightly from 2014’s 4.8% growth.  Per capita spending in Medicare was $11,904, which actually was up slightly from 2014’s, as the number of people covered by Medicare rose rapidly.  Medicaid expenditures weighed in at $545 billion, up 9.7% but only 3.8% on a per person basis.  Overall Medicaid spending rose 11.6% in 2014.  This kind of spending growth is a major headache for both the federal and state governments.  The federal government represented 295 of spending, households 28%, private business 20% and state and local governments 17%.

Hospital care, which accounts for a substantial part of all spending, $1036 billion, grew at a 5.6% rate and physician services, $635 billion, at a 6.3% rate.  Home health care was $89 billion; nursing home care $157 billion and prescription drugs, $325 billion.  Notwithstanding the growth of high-deductible plans, spending by consumers is not rising quite as that by businesses and governments.  The total spending growth in 2015 was driven as much by utilization and intensity of services as by unit prices.  On a per capita basis, changes in the population’s age/sex mix accounted for .6% of 2015’s overall 5% increase; while unit price increases were 1.2% and utilization was 3.2%.  Unit price growth actually slowed in 2015.  The new Administration and Congress clearly has its work cut out to figure out how to get these growth rates back to or below rates of economic growth.