Health insurance tax helped drive health spending in 2018
National health care spending increased by 4.6 percent in 2018 to $3.6 trillion, or 17.7 percent of the overall economy.
Health care spending grew last year but shrunk as a portion of overall spending.
A new analysis published in Health Affairs by Micah Hartman, a statistician in the CMS Office of the Actuary, finds that national health care spending increased by 4.6 percent in 2018 to $3.6 trillion, or 17.7 percent of the overall economy. That’s down from 17.9 percent the previous year.
One of the main drivers of the spending increase was the rising cost of insurance, which jumped 13.2 percent. That was a much more dramatic increase than in than 2017, when plan prices only went up 4.3 percent.
Related: Hospital costs drive private health insurance spending
Health Affairs attributes the rise in insurance costs largely to the health insurance tax, which was suspended in 2017 but went back into effect in 2018.
The spending increase came despite roughly 1 million fewer people with insurance coverage. The drop in coverage was driven largely by attempts by the Trump administration and Congress –– in both 2017 and 2018 –– to undermine the Affordable Care Act. Most significantly, the tax law enacted at the end of 2017 eliminated the ACA’s individual insurance mandate.
Medicare spending grew at a much faster rate, 6.4 percent, to $750 billion. While enrollment growth was typical (2.6 percent), per-enrollee expenditures rose by 3.7 percent, compared to only 1.6 percent in 2017. The portion of Medicare spending on private plans increased by over 11 percent, and now accounts for 36 percent of overall spending in the program.
In contrast, Medicaid spending only grew by 3 percent, reaching $597 billion. Per-enrollee spending grew by 2 percent.
One bright spot for consumers was the relatively modest growth in spending on prescription drugs: 2.5 percent. In fact, prices for retail prescriptions declined 1 percent.
Hospital spending was up 4.5 percent and spending on physicians and clinical trials went up 4.1 percent.
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