Healthcare spending passes $11,000 a person

By | December 5, 2019

Healthcare spending for each person living in the United States surpassed $ 11,000 in 2018 for the first time, bringing the total spending on healthcare to $ 3.6 trillion.

Healthcare spending grew slower than the economy as a whole, though, meaning that healthcare spending as a share of GDP decreased to 17.7%, down from 17.9% in 2017.

The figures, part of an annual, nonpartisan analysis from actuaries at the Centers for Medicare and Medicaid Services, come as Congress and presidential candidates are debating how to reduce national spending and curb what individuals pay for medical care.

The report specifically found that average per-person spending in 2018 was $ 11,172, an increase of $ 430 from the year before. Just six years earlier, in 2012, the U.S. was spending $ 2.8 trillion on healthcare, which equates to an average of $ 8,908 per person. The numbers reflect spending on healthcare across the board, including by private health insurance, the government, employers, and individuals.

In a Health Affairs article, actuaries wrote that spending increased in 2018 at only a slightly faster growth rate than in 2017, of 4.6% compared with 4.2%. This could be largely attributed to the nonmedical costs of health insurance, such as taxes and administration. Even though the bulk of healthcare spending is on personal healthcare — meaning hospital care, doctor services, and prescription drugs — the rise in the net cost of health insurance was enough to help drive the 0.4 percentage point acceleration in 2018.

In the particular case of the 2018 spending, the rise in the price of health insurance was caused by a tax issue that Congress happens to be debating ahead of a Dec. 20 spending deadline to avoid a shutdown.

Known as the Health Insurance Tax and created by Obamacare, the tax was levied on health insurance in 2018, which made plans more expensive than the year before because insurers raised their premiums to make up for the difference, passing on costs to patients.

The higher prices applied to plans people got through work, directly through an insurer, or through government plans administered by private insurers, known as Medicare Advantage and Medicaid managed care. According to IRS figures, the tax added up to $ 14.3 billion spread across the different types of plans.

“With relatively stable personal healthcare growth, when you have a health insurance tax at $ 14.3 billion that’s not there the year before … it’s enough to account for the bulk of the acceleration,” said Aaron Catlin, an author of the report and deputy director of the National Health Statistics Group in the actuary’s office.

In all, the net cost of health insurance rose by 13.2% in 2018, compared with 4.3% the year before. Part of that was because the Health Insurance Tax wasn’t in effect in 2017 because Congress lifted it. The tax was big enough to account for most of the acceleration, even with faster growth in economy-wide inflation also playing a role, the actuaries said.

This year, the Health Insurance Tax will not apply because Congress lifted it, though it’s set to go into effect again in 2020. Health insurers and business groups have been pushing Congress to suspend the tax again its spending bill, and are likely to point to Thursday’s report to bolster their case.

But they are facing a deeply divided Congress when it comes to healthcare reform. Even though Democrats have voted in favor of lifting the tax before, the Democrat-controlled House this session, ahead of an election year, will be wary of headlines that show they voted in favor of “repealing” a piece of former President Barack Obama’s signature healthcare law.

They also are aiming to cast themselves as staunch defenders of the law at a time when the Trump administration has joined a lawsuit to have Obamacare thrown out in court.

The report out Thursday provides them additional ammunition. It found that for the second year in a row, the number of uninsured rose by 1 million people, to 30.7 million, under President Trump.

Actuaries said they couldn’t suss out the reason for the drop, but it was primarily among people who buy health insurance on their own, and not among those who get coverage through a government program or through work. The report notes that premiums increased for people in 2018, an outcome that likely priced people out of the market.

Democrats have blamed the rise in the uninsured on the Trump administration, which has changed regulations around Obamacare. Other factors, including funds that expired in Obamacare that helped make health insurance cheaper, also played a role.