CMS Actuary releases 2019 National Health Expenditures
Total national healthcare spending in 2019 grew 4.6%, which was similar to the 4.7% growth in 2018 and the average annual growth since 2016 of 4.5%, according to a study conducted by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) and published today ahead of print by Health Affairs.
This report includes health expenditure data though 2019 and therefore does not include any of the effects of the coronavirus disease 2019 (COVID-19) pandemic on health care spending. Future reports for 2020 forward will measure health expenditures based on the latest available data and will reflect the impacts of the pandemic on total health care spending as well as on the distribution of spending among the services, payers, and sponsors of health care.
The share of the economy devoted to health spending was relatively stable in 2019, at 17.7% compared with a 17.6% share in 2018. The 4.6% growth in healthcare expenditures was faster than the 4.0% overall economic growth as measured by Gross Domestic Product (GDP) in 2019. The growth in total national healthcare expenditures in 2019 reached $3.8 trillion, or $11,582 per person, up from 2018 when total national health expenditures were $3.6 trillion, or $11,129 per person.
Spending for personal health care, which includes health care goods and services, accounted for 84% of total health care spending in 2019 and increased 5.2%, a faster rate than the 4.1% it increased in 2018. The faster growth in personal health care spending was driven largely by growth for hospital care, retail prescription drugs, and physician and clinical services.
Offsetting the faster growth in personal health care spending was a decline in the net cost of health insurance, which includes nonmedical expenses such as administrative costs, taxes, and underwriting gains or losses. The net cost of health insurance declined 3.8% in 2019 largely because of a suspension of the health insurance providers’ tax.
This may sound like good news but it reads to me more like people had to pay more of their healthcare expenses out of pocket with insurance picking up less of the cost, which really isn't a good thing...especially if the main reason for that drop is simply the suspension of the ACA's health insurance tax...
Private health insurance spending (31% of total health care spending) increased 3.7% to $1.2 trillion in 2019, which was slower than the 5.6% rate of growth in 2018. The deceleration in overall private health insurance spending growth was driven by a 7.9% decline in the net cost of private health insurance that was primarily the result of the suspension of the health insurance tax in 2019. Private health insurance enrollment increased slightly in 2019, by 0.5%, as enrollment in employer-sponsored insurance increased 0.7%.
Medicare spending (21% of total health care spending) grew 6.7% to reach $799.4 billion in 2019, which was slightly faster than the 6.3 % growth in 2018. The acceleration in 2019 reflected faster growth in Medicare private health plan spending (39% of total Medicare expenditures in 2019), which increased 14.5% following growth of 12.6% in 2018. Growth in fee-for-service Medicare expenditures slowed in 2019, increasing 2.2% compared to 3.0% growth in 2018. Overall, Medicare enrollment growth was steady in 2019, increasing 2.6%—the same rate as in 2018.
Medicaid spending (16% of total health care spending) increased 2.9% in 2019 to reach $613.5 billion. This was similar to the 3.1% rate of growth in 2018. This relatively steady growth was influenced by faster spending growth for most goods and services and a decline in the net cost of insurance—a decline that was in part due to the health insurance tax moratorium in 2019. In 2018 and 2019, Medicaid enrollment was estimated to have decreased 0.9% and 1.5%, respectively.
Out-of-pocket spending (11% of total health care spending at $406.5 billion in 2019) includes direct consumer payments such as copayments, deductibles, and spending not covered by insurance. Out-of-pocket spending grew 4.6% in 2019, which was faster than the 3.8% growth in 2018.
One term which a lot of people tend to get confused about is "out of pocket costs," because it's often used to include premiums along with deductibles, co-pays & co-insurance, even though it really shouldn't be.
Health care spending growth was faster in 2019 for the three largest goods and service categories – hospital care, physician and clinical services, and retail prescription drugs.
Believe me, insurance carriers are guilty of a long list of sins and greed...but anyone not noting that hospital care, doctor/clinical costs and drug costs as being the biggest drivers of healthcare cost increases isn't serious about the issue (and yes, I know some doctor specialties are actually underpaid).
Hospital spending (31% of total health care spending) growth accelerated in 2019, increasing 6.2% to $1.2 trillion compared to 4.2% growth in 2018. The faster growth in 2019 was driven by faster growth in non-price factors (such as the use and intensity of services), which increased 4.2% in 2019 compared to 1.8% in 2018, while growth in hospital prices grew more slowly, increasing 2.0% after growth of 2.4% in 2018. Growth in all three major payers of hospital care (private health insurance, Medicare, and Medicaid) accelerated in 2019.
Physician and clinical services spending (20% of total health care spending) increased 4.6% to $772.1 billion in 2019, which was faster than the rate of growth in 2018 of 4.0%. Non-price factors were the largest contributor to the acceleration in physician and clinical services expenditures, as prices increased 0.8% in 2019, or at about the same rate as in 2018.
Retail prescription drug spending (10% of total health care spending) increased 5.7% in 2019 to $369.7 billion, accelerating from growth of 3.8% in 2018. Faster growth in use, or the number of prescriptions dispensed, contributed to the acceleration in total retail prescription drug spending, as prices for prescription drugs declined for the second consecutive year in a row, decreasing by 0.4% in 2019 after falling by 1.0% in 2018.
Additional highlights from the report include:
- Sponsors of Healthcare include estimates of spending by the businesses, households, other private funds and governments that are responsible for financing, or sponsoring, health care payments. Expenditures in these areas follow:
- Federal government’s spending on health care increased 5.8% in 2019, up slightly from a rate of 5.4% in 2018. The faster growth in 2019 was driven mainly by federal general revenue and Medicare net trust fund expenditures that increased 9.4% in 2019 after growth of 6.1% in 2018.
- Private businesses’ health care spending grew more slowly in 2019, increasing 3.7% compared to growth of 5.7% in 2018. This slower growth was driven largely by a deceleration in private businesses’ contributions to employer-sponsored private health insurance premiums.
- Household’s health care spending increased 4.5% in 2019 compared to 4.8% growth in 2018. Out-of-pocket spending and contributions to employer-sponsored private health insurance premiums accounted for almost two-thirds of household spending in 2019 (38% and 27%, respectively).
Previous vintages of the National Health Expenditure estimates have been revised to reflect the most recent and up-to-date source data that is available.