Growth In Spending On Privately Insured Drives Much Of U.S. Health Spending Growth In 2017 And Early 2018

By Corwin N. Rhyan
Altarum, July 19, 2018

A new Altarum research brief estimates private versus public health spending on a timely basis and finds that:

* Spending and price growth among the privately-insured population accelerated in 2017 and early 2018 relative to Medicare and Medicaid, despite very low growth in private insurance enrollment. This reverses the trend seen from 2009 through 2016, when private spending growth was near or below Medicare and Medicaid rates.

* Since the start of the economic recovery in 2009, total Medicaid spending has grown by 72.6%—more than Medicare (50.7%) and private payer spending (49.4%)—largely due to increases in enrollment, although Medicaid spending has slowed significantly, averaging only 2.3% since January 2017.

* On a per enrollee basis, private payer spending has grown 45.9% since 2009, three times the rate of Medicare and Medicaid per enrollee spending.

* Faster rising private prices are a major factor in the divergence between public and private spending growth, with private prices up 8.2% since June 2014, although recent data show an uptick in public prices as well.

* Breaking down spending growth attributable to enrollment, prices, and utilization & intensity, we find more than half the growth in both Medicare and Medicaid spending since 2014 is due to higher enrollment, while private spending growth over this period has been driven almost entirely by higher prices and increased utilization & intensity, in nearly equal measure.

https://altarum.org…

This Altarum study shows that half of the growth in spending in Medicaid and Medicare has been due to the increased enrollment in each of these programs. In contrast, there has been little increase in enrollment in private plans so almost all of the spending increase has been due to higher prices and due to increased utilization & intensity of care.

Unlike the total spending increases in each sector, Figure 3 on page 4 of their report (link above) demonstrates the spending increase per enrollee in each sector. Clearly the private plans have been ineffective in controlling prices and in controlling utilization & intensity of care, whereas the government programs – Medicaid and Medicare – have been quite effective, resulting in a much slower spending increase per enrollee.

With everyone being concerned about our very high health care spending, the lesson here shouldn’t be too difficult. Don’t use private health plans to try to control spending. Instead improve Medicare and expand it to cover everyone; that will place us on a sustainable spending trajectory.

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