CMS Actuaries: Nationwide Healthcare Spending Increased 4.6% in 2019
On Wednesday, December 16, the actuaries at the Centers for Medicare and Medicaid Services (CMS) released their analysis of national healthcare expenditures, concluding that nationwide healthcare spending growth increased by 4.6 percent in 2019, in line with the rates of increase in the past few years.
As a CMS press release stated, “A new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), published online today by Health Affairs, estimates that in 2019 health care spending in the United States increased 4.6 percent to $3.8 trillion, or $11,582 per person. The 4.6 percent growth rate in 2019 was similar to the rate in 2018 (4.7 percent) and was consistent with the average annual spending growth rate of 4.5 percent that has been observed since 2016. Faster growth in personal health care spending was offset by a decline in the net cost of health insurance. The report includes health expenditure data through 2019 and therefore does not include any of the effects of the coronavirus disease 2019 (COVID-19) pandemic on health care spending. This study will also appear in the January 2021 issue of Health Affairs.”
According to the press release, “Health care spending increased 4.6 percent in 2019, which is faster than growth in the nominal gross domestic product (GDP), which increased 4.0 percent. In 2019, the share of the economy devoted to health care spending, as measured by the GDP, was relatively stable, increasing to 17.7 percent from 17.6 percent in 2018. Steady growth in total health care spending in 2019 reflected faster growth in personal health care spending that was offset by a decline in the net cost of health insurance associated with the suspension of the health insurance tax. Personal health care spending accounted for 84 percent of total health care spending in 2019 and increased 5.2 percent—compared with 4.1 percent growth in 2018—driven largely by accelerated spending growth for hospital care, retail prescription drugs, and physician and clinical services.”
Further, the press release noted, “On a per capita basis, national health spending grew 4.1 percent in 2019, similar to the 4.2 percent increase in 2018. Growth in per capita health care spending in 2019 reflected faster growth in the residual use and intensity of health care goods and services and slower growth in medical prices (see the exhibit below). Medical prices increased 1.1 percent in 2019 compared with 2.3 percent in 2018, whereas the residual use and intensity of services increased 2.5 percent in 2019, which is faster than the 1.4 percent growth seen in 2018. The rate of growth due to changes in demographic factors remained at 0.5 percent in 2019. Health care spending increased 4.6 percent in 2019, which is faster than growth in the nominal gross domestic product (GDP), which increased 4.0 percent. In 2019, the share of the economy devoted to health care spending, as measured by the GDP, was relatively stable, increasing to 17.7 percent from 17.6 percent in 2018.”
CMS quoted Anne Martin, an economist in the CMS Office of the Actuary and first author of the Health Affairs article, as stating that “Health care spending in 2019 increased at about the same rate as it had in 2018 and was similar to the average annual growth since 2016. This relative stability in health care spending growth over the last four years,” Martin stated, “preceded the COVID-19 pandemic in 2020. The full impact of the pandemic on the health care sector is still not known, but it will certainly have profound consequences on the provision and consumption of health care in 2020 and perhaps beyond.”
The CMS actuaries said the following about private health insurance expenditures, Medicare spending, and Medicaid spending:
> Private health insurance (3.7 percent)—reached $1.2 trillion in 2019 and accounted for 31 percent of total national health spending. Private health insurance spending increased 3.7 percent in 2019, which was slower than the 5.6 percent growth rate seen in 2018. The slower growth in 2019 was driven in large part by the suspension of the health insurance tax. Enrollment in private health insurance increased slightly in 2019, growing 0.5 percent. On a per enrollee basis, private health insurance spending increased 3.2 percent in 2019, following 6.4 percent growth in 2018.
> Medicare spending (6.7 percent)—reached $799.4 billion in 2019, accounting for 21 percent of total national health care expenditures. Total Medicare spending increased 6.7 percent compared with 6.3 percent growth in 2018. Total Medicare enrollment growth was steady, increasing 2.6 percent in both 2018 and 2019. Per enrollee Medicare expenditures grew at a slightly faster pace, increasing 4.0 percent in 2019 compared with 3.6 percent in 2018. Fee-for-service Medicare spending accounted for 61 percent of overall Medicare spending in 2019, down substantially from 67 percent in 2016, reflecting the diminishing fee-for-service share of total Medicare enrollment during this period. Fee-for-service Medicare spending increased 2.2 percent in 2019, which was slower than the growth seen in 2018 of 3.0 percent. Medicare private health plan spending accounted for 39 percent of total Medicare spending in 2019 and increased 14.5 percent, up from 12.6 percent growth in 2018.
> Medicaid expenditures (2.9 percent)—reached $613.5 billion in 2019, accounting for 16 percent of total national health spending. Medicaid spending growth increased 2.9 percent in 2019, similar to the 3.1 percent growth in 2018. The relatively steady growth in 2019 was influenced by faster spending growth for most goods and services and a decline in the net cost of insurance, which was in part due to the health insurance tax moratorium in 2019. Enrollment in Medicaid was estimated to have decreased 1.5 percent in 2019 after a smaller decline of 0.9 percent in 2018. On a per enrollee basis, Medicaid spending accelerated to 4.5 percent in 2019 compared with 4.0 percent growth in 2018.
Meanwhile, the actuaries also noted the following:
> Hospital spending (6.2 percent)—reached $1.2 trillion in 2019, representing 31 percent of overall health care spending. Growth in expenditures for hospital care accelerated to 6.2 percent in 2019 compared with 4.2 percent in 2018. Hospital prices increased 2.0 percent in 2019 compared with 2.4 percent in 2018, whereas nonprice factors (such as the use and intensity of goods and services) grew 4.2 percent in 2019 compared with 1.8 percent in 2018.
> Physician and clinical services (4.6 percent)—spending reached $772.1 billion, or 20 percent of total health care expenditures in 2019. Spending increased 4.6 percent in 2019, following slower growth of 4.0 percent in 2018. Nonprice factors, such as the use and intensity of services, were the largest contributor to the acceleration in expenditure growth, as price growth remained steady in 2019 at about 0.8 percent. Spending growth for clinical services (5.8 percent) continued to outpace growth in spending for physician services (4.2 percent) in 2019.
> Retail prescription drugs (5.7 percent)—expenditures reached $369.7 billion in 2019 and represented 10 percent of overall health spending. Faster growth in use contributed to the acceleration in total retail prescription drug spending growth as the total number of retail prescriptions dispensed grew faster in 2019 than in 2018. Retail prescription drug prices decreased 0.4 percent in 2019 after a larger decline of 1.0 percent in 2018 as price growth slowed for brand-name drugs and declined for generic drugs.
