Health care spending continues to rise, despite cost-saving strategies
Total health care spending in the U.S. grew by close to $2 trillion dollars between 1996 and 2016.
A new analysis published in JAMA finds that total health care spending in the U.S. grew by close to $2 trillion dollars between 1996 and 2016. The report estimates that total spending in health care grew from $1.4 trillion to $3.1 trillion during that time period.
The paper also found that health care spending increased at an annualized rate of 2.9 percent for public plans, 2.6 percent for private insurance, and 1.1 percent for out-of-pocket payments. Health care spending was estimated at $5,259 annually per person in the U.S. in 1996; it had grown to an annual cost of $9,655 per person 20 years later.
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The article was accompanied by an editorial by Andrew B. Bindman, M.D., a professor with the Philip R. Lee Institute for Health Policy Studies at the University of California, San Francisco. Bindman noted that rising health care expenditures are not primarily driven by population growth and utilization of services. Bindman said rising health care costs are driving higher spending—and many of those rising costs are due to consolidation in the health care provider industry.
Health care spending has become a top policy issue
The JAMA articles come at a time when health care is the number-one domestic issue for many Americans, according to recent polls. The 2020 elections are expected to feature strong debate on how to improve the nation’s health care system, especially when it comes to easing the financial burdens created by high health care costs.
The study looked at close to six million insurance claims, but excluded some expenditure categories, such as durable medical equipment expenditures, expenditures for over-the-counter drugs, and infrastructure development.
It found that after adjusting for increases in population size and the aging population, 108 of 154 health conditions had seen spending increases between 1996 and 2016. Over the studied time period, low back and neck pain was the top area of expenditures for private insurance; diabetes and ischemic heart disease were the areas of highest expenditure for public programs such as Medicare. Dental care was the area of highest out-of-pocket expenditures.
The analysis described spending increases as “substantial” in these areas. Care for low back and neck pain, for example, saw a spending increase that was considerably higher than the increase in cases treated. “Although the spending on low back and neck pain increased by 6.7 percent annually between 1996 and 2016, the number of prevalent cases increased by only 1.1 percent annually and the health burden (measured using disability-adjusted health-years) increased by only 1.3 percent annually,” the report said, adding that the rise in spending was troubling because this was an area where cost-saving strategies have been a priority for many payers and providers—strategies that apparently were ineffective.
Consolidation is creating “Empires:” JAMA editorial
The Bindman editorial noted that high health care costs are a well-known feature of the U.S. system. “International comparisons reveal US prices that are many times higher than charged in European and other high-income countries for the vast majority of diagnostic and therapeutic procedures,” Bindman wrote. “For example, outpatient computed tomography and magnetic resonance imaging scans are priced 4 to 5 times higher in the United States than in the Netherlands and Switzerland. Such price differences are even greater for hospital-based care.”
Bind added that although researchers don’t understand all the reasons health care costs are higher in the U.S., one factor unique to this country is the growing trend of consolidation of hospitals and provider groups in the U.S.
“U.S. physicians are increasingly working for hospitals, and hospitals are in turn merging to formulate large chains. Although there is the potential for these larger health systems to create more efficient, integrated delivery systems, this does not appear to be happening on a widespread scale,” Bindman wrote. “The most visible aspect of what health system consolidation does is limit competition, which results in higher prices. This is despite the fact that the vast majority of these consolidated health systems are nonprofit entities.”
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