Hospital costs drive private health insurance spending
Between 2016 and 2018, increasing hospital spending added $43 billion to health insurers' costs.
The $101 billion increase in private health insurance spending between 2016 and 2018 is being driven by hospital spending, to the tune of some $43 billion—representing the chief source of the escalation.
That’s according to an economic analysis released by the Partnership to Fight Chronic Disease about the sources of higher health care spending—and while the others are nothing to sneeze at, the analysis finds that hospitals are the chief driver.
What Accounts for the Growth in Private Health Insurance Spending? by Kenneth E. Thorpe, Ph.D., PFCD chairman and Robert W. Woodruff professor and chair of health policy and management at Emory University, also finds that during the same period, insurance plan administration costs and profits accounted for $21.3 billion, while spending on physician and clinical services was responsible for a $20.6 billion increase. Prescription drugs accounted for $3.6 billion of the increase.
Related: Waste accounts for a quarter of health care spending
“The highest of these insurance spending costs glaringly point at utilization, and with an increasing population of Americans living with one or more chronic conditions, the demand for health services will inevitably persist,” Thorpe says. “Achieving better overall health is essential to lowering health care costs, and the most impactful place to start is by elevating how we address chronic disease on the health care agenda.”
The elements that make up health spending growth include how much a health insurer is spending on medical care services (price and utilization) and the plan’s administrative spending (operational costs and profits). Then there are nursing care facilities ($3 billion), home health services ($.79 billion) and other health, residential and personal care ($9.3 billion).
The treatment of chronic disease is projected to swell spending even further between 2016 and 2030, totaling some $42 trillion. Sixty percent of U.S. adults, the report finds, have at least one chronic condition, and more than forty are living with two or more. To cut those escalating totals, it adds, “efforts to find health savings must consider how better patient care and chronic disease management can reduce the drivers of spending growth.”
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