National Health Spending in 2018

By December 9, 2019 December 10th, 2019 Commentary

Health care spending in the United States grew 4.6% in 2018, to $3.6 trillion dollars or $11,172 per person.  Details are presented in a Health Affairs article.   (HA Article)  This is the same rate of increase as in 2016 and a little higher that the 4.2% increase in 2017.  Per capita spending increases, probably the best way to assess changes, rose 4% in 2018 compared to 3.5% in 2017.  Price rises accounted for 2.1 percentage points of the 4% per capita spending growth; changes in use and intensity of services accounted for 1.3 percentage points and changing age and sex mix of the population for the remaining .6 of a percentage point.  Medical price growth accelerated in 2018 but was not out of line with those increases over the last 15 years or so.  A substantial driver of the rise actually related to reinstatement of the insurance tax on health plan premiums.  In real dollars, since 2012, health spending generally rises faster than GDP growth, although real health spending growth in 2018 was 2.5% while GDP rose 2.9%.  We tend to think of health spending as being for personal health care services and products, and that does account for 84% of all health spending, and it grew at 4.1% in 2018, the same rate as for 2016 and 2017.  And within that personal health care services and products category, hospital, physician and retail drug spending account for 73%.  Hospital spending rose 4.7% in 2017 and 4.5% in 2018.  Physician services spending rose 4.7% in 2017 and 4.1% in 2018, while drug spending increased 1.4% in 2017 and 2.5% in 2018.

The federal government represented 28% of total health spending in 2018.  Households had a similar percentage.  Private business paid 20% and state and local governments 17%.  Spending growth for the federal government was 5.6%, up substantially from 2017 and largely driven by Medicare spending.  State and local government spending growth actually decelerated, from 3.6% in 2017 to 2.5% in 2018.  Household spending rose 4.4% and private business spending grew 6.2%, an acceleration and the fastest growth rate since 2003.  (More cost-sharing coming.)  Private health insurance costs (which can be both group and individual policies) were 34% of all spending and rose 5.8% in 2018, with prices growing 4.5%, while utilization increases were subdued.  As is usually the case in recent years, hospital prices and spending were a primary driver of private insurance costs.  Per enrollee spending for private health insurance was $6199, due to the highest rate of growth since 2004, although again, the reinstatement of the premium tax was a factor.  One item to note in regard to Medicare is that per beneficiary fee-for-service growth was 3.6% in 2018, the same as it was for Medicare Advantage beneficiaries, but the MA plans had to pay the reinstated premium tax.  This suggests that per person MA spending growth is below that of FFS spending growth.  Looking forward, the premium tax has once again been suspended for 2019 and a comprehensive revision to the calculation of the health spending accounts will be implemented so next year’s report will be quite interesting.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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