Employer-Sponsored Health Plan Spending Trends

By October 15, 2018 Commentary

Using data from the Health Care Cost Initiative, researchers analyze spending trends over the period from 2007 to 2016 in employer-sponsored health plans.   (HA Report)   In 2016 these plans still covered the majority of Americans and were the single largest source of health spending at over $1.1 trillion.  In dollars this was a rise from $3752 per person in 2007 to $5394 in 2016.  Over the entire period per person spending rose by 44% or 4.1% annually, or twice the rate of general spending of 2.3%.  Employer-sponsored health insurance spending rose much faster in the earlier period from 2000 to 2007, at 8.3% annually, so I suppose we should be grateful for the modest slowdown.  Looking at large categories of spending, prescription drugs showed the most volatility, with annual rates of increase dropping from a little over 4% early in the study period to less than 2% in 2012, spiking to over 11% in 2014 and falling back to around 6% more recently.  Professional services and outpatient hospital ones were 60% of all spending in 2007 and 62% in 2016.  Outpatient hospital service spending was growing at over 10% in 2009 and declined to around 4% before reaccelerating to 6% in the last couple of years.   Professional services, largely physician charges, were the single largest category of spending, with annual increases of between 2% and 6% through the study period.

Inpatient spending growth generally fell over the study period, falling to almost 1% before slightly accelerating recently.  Looking at some subcategories, outpatient surgery and ER use had the greatest rates of increase.  But generally the distribution of spending remained roughly the same over the study period.  Surprisingly for all the concerns about out-of-pocket spending, it rose at almost the exact same rate as total spending, 43%.  Probably the pain comes the absolute dollar increase and the faster growth in health spending than personal income.  And interestingly, on a percent basis there was less out-of-pocket spending on drugs by the end of the period than the start, and more on ER services and outpatient services.  Although this analysis did not decouple utilization and price effects, it is likely that price was much more responsible for the spending increase than was utilization.  And per person spending by these employment-based plans is rising significantly faster than either Medicare or Medicaid, driven again mostly by price differences.

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