Three Things to Know About Healthcare Spending

Frost

Spending grew across all areas of healthcare services from 2007 through 2016, according to a new report.

The study, published in Health Affairs, found that total spending per capita (not including premiums) on health services for enrollees in employer-sponsored insurance plans increased by 44% from 2007 through 2016 (average annual growth of 4.1%).

Using a national sample of healthcare claims data from the Health Care Cost Institute (HCCI), Amanda Frost, PhD, Health Care Cost Institute senior researcher, and colleagues found that annual growth in per capita spending on healthcare for the employer-sponsored insurance (ESI) population slowed following the recession (2010 to 2014) but began to increase toward pre-recession rates in the final two years of our study (2015 to 2016)-rising to 4.8% spending growth in 2016.

“People covered by ESI make up more than half of insured Americans (54%), yet most of what we know about health spending comes from studies of the Medicare population,” Frost says. “There is comparatively less research on the ESI population. HCCI now has a dataset spanning 10 years of commercially insured healthcare claims, we felt it pertinent and informative to publish a retrospective look at ESI healthcare spending in America.”

Related: Survey Sheds Light on Frequency of Surprise Medical Bills in America

The study also found that:

• Per capita spending increased by 44% (23% after adjusting for inflation) over the 10-year period (2007 to 2016), with spending growth occurring across all major categories of health services (inpatient, outpatient, professional, and prescription drugs).
• Per capita out-of-pocket spending increased at a similar rate to total spending-43% over the same 10 years. This uptick occurred despite a decrease in out-of-pocket spending on prescription drugs-especially brand prescription drugs, as more consumer dollars were spent on medical services.

“We found spending grew across all areas of healthcare services. The distribution of spending across the major categories of services, in other words what services the dollars were spent on, did not shift very much between 2007 and 2016,” Frost says. “This is pertinent as it shows that these health spending increases affect executives across the health care spectrum, not specifically in one sector or another.”

Based on the study there are three things healthcare executives should know:

• Spending is increasing across all categories of service, and spending appears to now be growing at faster, pre-recession rates.
• Per capita out-of-pocket has increased just as fast as per capita total spending. “One reason this is surprising is because with the rise in prevalence of high deductible health plans we would expect that consumers out-of-pocket spending to be increasing faster than total spending,” Frost says. “But in fact, as total and out-of-pocket spending have been increasing at similar rates, we see that consumers are still paying roughly the same percentage of the total bill in 2016 as they were in 2007 (16%).”
• Consumers spent less on average out of pocket on prescription drugs in 2016 than in 2007 due to spending less on brand-name prescriptions. “However, total out of pocket spending still increased by 43% over the 10 years, as patients spent more of their dollars on medical services and fewer on prescription drugs,” Frost says.