Private insurance spending up 5.8 percent; CMS blames ACA health insurance tax
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Senior Manager, Health Research Institute, PwC USDecember 13, 2019
Spending on private health insurance, Medicare and Medicaid increased faster in 2018 than the previous year, a trend that was attributed to the reinstatement of the health insurance tax, according to a study conducted by the Office of the Actuary at CMS and published in Health Affairs.
Private health insurance spending increased 5.8 percent in 2018, a higher clip than the 4.9 percent growth in 2017. After a one-year moratorium in 2017, the health insurance tax that was part of the ACA was reinstated for 2018.
Medicare’s spending growth was further accelerated, coming in at a 6.4 percent growth rate in 2018, compared with 4.2 percent in 2017. Again, the study points to increased costs for Medicare private health plans, such as Medicare Advantage, due to the health insurance tax, but also growth in Medicare spending on goods and services and administrative costs.
Spending on retail prescription drugs grew 2.5 percent in 2018, compared with 1.4 percent in 2017, according to the study. At a time when the pharma industry is under intense scrutiny from Congress and the administration, prices notched a 1 percent decline, the first drop in 45 years for retail pharmacy prescriptions, not those medicines administered in hospitals or physicians’ offices.
Overall, 1 million people lost insurance in 2018, for a total of 30.7 million uninsured.
HRI impact analysis
The numbers speak to the cost crunch that healthcare consumers and employers are facing. Out-of-pocket spending, which covers copayments, deductibles and spending not covered by insurance, grew 2.8 percent in 2018, higher than the 2.2 percent growth rate in 2017. Healthcare spending by private businesses rose 6.2 percent in 2018, driven by faster growth in employer-sponsored private health insurance premiums.
In June, HRI’s Medical Cost Trend: Behind the Numbers 2020 report projected medical cost trend in the employer insurance market for fiscal year 2020 to be 6 percent, up over the flat trend seen in 2018 and 2019, and driven primarily by prices. The increases are prompting employers to take a more active role in managing costs. As Congress seeks to respond to business and consumer concerns about what they are paying for healthcare, insurers and providers are likely to face continued scrutiny and pressure to reduce costs.