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Analysis

Health Spending Grew 4.6% in 2018, Outpaced by Overall Economy

By Jack O'Brien  
   December 05, 2019

The total number of uninsured people rose by 1 million for the second consecutive year.

Healthcare spending in the U.S. grew by 4.6% in 2018, totaling $3.6 trillion, according to data released Thursday by the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary.

Healthcare, as a share of the overall economy, slipped to 17.7% of gross domestic product (GDP) in 2018, down slightly from 17.9% in 2017.

The statistics, published in Health Affairs, show that healthcare spending averaged $11,172 per person in 2018, while the total personal healthcare spending growth rate held steady at 4.1%.

National healthcare spending increased faster in 2018 than it did in 2017, but it equaled the rate seen in 2016. CMS attributed the recent increase to acceleration in health insurance costs, which grew by 4.3% in 2017 and 13.2% in 2018. Another contributing factor was the reinstatement of the health insurance tax after a one-year moratorium.

For the second consecutive year, the total number of uninsured people rose by 1 million.

"Healthcare spending growth picked up across all major payers in 2018 as medical prices grew faster, due in part to the reinstatement of the health insurance tax on all health insurance providers," Micah Hartman, a statistician in the CMS Office of the Actuary, said in a statement. "However, economic growth outpaced healthcare spending and the share of the economy devoted to health care fell."

Related: U.S. Healthcare Spending Slowed to 3.9% in 2017

Rising medical prices accounted for an uptick in per capita healthcare spending last year. Hospital spending—which accounted for 33% of overall healthcare spending in 2018—led the way among goods and services spending growth, at 4.5%.

Growth in expenditures slipped slightly to 4.5%, though hospital prices rose from 1.7% in 2017 to 2.4% in 2018. Additionally, growth in total inpatient days slid from 1.7% in 2017 to 0.7% in 2018. 

Physician and clinical services spending slowed to 4.1% in 2018, down from 4.7% in 2017, while retail prescription drug spending rose from 1.4% in 2017 to 2.5% in 2018.

Related: Rising Prices Lead to All-Time High Healthcare Spending

CMS released projections in February for average healthcare spending growth rates of 5.5% annually between 2018 to 2027, totaling nearly $6 trillion.

The study projected an acceleration in hospital spending from 4.4% in 2018 to 5.1% in 2019, thanks to faster than expected growth in Medicare and Medicaid.  

The study also attributed the growth in overall healthcare spending to more baby boomers entering Medicare and a 2.5% increase in medical goods and services through 2027.

Related: Health Spending Growth to Average 5.5% Annually Through 2027

On the payer side, private health insurance spending totaled $1.2 trillion, growing by 5.8% in 2018 compared to 4.9% in 2017.

Meanwhile, both Medicare and Medicaid experienced spending growth increases of 6.4% and 3%, respectively. 

The federal government's healthcare spending rose by 5.6% in 2018, doubling the rate from 2017, as growth in Medicare and Medicaid expenditures increased significantly. 

The largest of portions of healthcare spending went to the federal government and households, each with 28%, private businesses at 20%, state and local governments at 17%, and "other private revenues" at 7%.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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