Hospital Costs #1 Driver Of $101B Increase In Private Health Insurance Spending

The Partnership to Fight Chronic Disease (PFCD) has just released, “What Accounts for the Growth in Private Health Insurance Spending?” an economic analysis by Kenneth E. Thorpe, Ph.D., PFCD Chairman and Robert W. Woodruff Professor and Chair of Health Policy and Management at Emory University.

Between 2016 and 2018, private insurance spending increased by $101 billion overall. Of that total, hospital spending grew by nearly $43 billion. At the same time, there was a $21.3 billion increase in insurance plan administration costs and profits and a $20.6 billion increase in spending on physician and clinical services. Prescription drugs accounted for $3.6 billion of the increase.

“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,” states Dr. Thorpe. “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.”

Health spending growth is determined by how much a health insurer is spending on medical care services (price and utilization) and the health plan’s administrative spending (operational costs and profits). This analysis determined the leading drivers of increased spending in the private market using the 2016-2018 National Health Expenditures (NHE) data reported by the Centers for Medicare & Medicaid Services (CMS).ⁱ  Additional costs assessed include nursing care facilities ($3B), home health services ($.79B) and other health, residential and personal care ($9.3B).

Between 2016 and 2030, chronic disease is projected to cost the U.S. $42 trillion.ⁱⁱ With six in ten U.S. adults having at least one chronic condition, and more than four in ten living with two or more,iii  efforts to find health savings must consider how better patient care and chronic disease management can reduce the drivers of spending growth.

A full copy of the analysis, an infographic and video brief can be found here.

ⁱ Accessed from: Centers for Medicare and Medicaid Services at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html?redirect=/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp

ⁱⁱ What is the Impact of Chronic Disease on America? Partnership to Fight Chronic Disease. Available at https://www.fightchronicdisease.org/sites/default/files/pfcd_blocks/PFCD_US.FactSheet_FINAL1%20%282%29.pdf

ⁱⁱⁱ Buttorff C, Ruder T, Bauman M. Multiple Chronic Conditions in the United States. Santa Monica, CA: RAND Corporation, 2017. Available at https://www.rand.org/pubs/tools/TL221.html.