A federal report from actuaries at the Centers for Medicare and Medicaid Services documented trends that are likely to further fuel the battle between Republicans and Democrats over how to slow health-care spending growth that has already put the U.S. far ahead of most comparable wealthy countries.
Overall, national health-care spending rose to $3.65 trillion in 2018, up 4.6% from 2017. The U.S. spent $11,172 per person, and national health-care spending accounted for 17.7% of the economy last year, compared with 17.9% in 2017.
The data indicate some notable shifts related to changes in insurance coverage, the price of drugs and legislative actions.
Retail prescription drug prices declined by 1% in 2018, the first drop since 1973. The decrease reflects a decline in generic drug prices and relatively slow growth in prices for brand-name drugs, officials said. President Trump has angered Democrats by taking credit for prescription-drug prices he says are falling, and the data may fuel further scrutiny over the effectiveness of administrative policies to spur greater use of generics.
The number of people without insurance rose by 1 million in 2018 for the second consecutive year, with 30.7 million individuals uninsured. Democrats have criticized Mr. Trump for his efforts—including ending billions of dollars in payments to insurers and expanding health plans that are cheaper but don’t provide the health law’s consumer protections—to roll back the 2010 Obama-era health law that expanded coverage to an estimated 20 million people.
While the overall acceleration in national health-care spending wasn’t that large relative to other years, an Affordable Care Act tax accounts for most of the increase, according to the report. The tax, an annual fee on all health insurers, is among several imposed under the law to cover its estimated 10-year cost of more than $1 trillion.
The tax has been controversial, with consumer and industry groups saying it will raise premiums and hurt consumers. Congress suspended the tax in 2017 and 2019. It is slated to kick in again in 2020.
Federal officials on Thursday linked the tax to a rise in the net cost of private insurance, which includes factors such as insurers’ costs for premium taxes and bills. The cost grew 15.3% last year to $164 billion, its fastest rate of increase in 15 years.
Officials said the growth in the net cost of insurance was also behind some of the growth in spending on Medicaid, a federal-state program for low-income and disabled people. Overall spending on the program increased 3% to about $598 billion in 2018.
The impact of the tax in 2018, when it was in effect, could provide a glimpse at its implications for future years and galvanize its opponents. A coalition of industry and consumer groups are lobbying for a two-year delay. The levy, known as the “HIT tax,” is expected to generate $15.5 billion in 2020, according to the Internal Revenue Service.
Officials also said the tax played a role in a 6.7% increase in spending last year on per-enrollee private health insurance—the amount spent per person on health coverage, including premiums paid to managed care, self-insured health plans and others—which is the highest growth rate since 7.5% in 2004.
“It was responsible for a significant portion of the rise we saw,” said Micah Hartman, the report’s lead author.
The national spending data provides a window into the areas of the industry that are driving increases as well as the factors behind that rise.
On average, wealthy European countries spend about half as much per person on health care than the U.S. does, according to the Kaiser Family Foundation. In 2016, the U.S. had the lowest life expectancy of 12 comparable countries despite the higher spending.
Health-care spending is expected to accelerate as baby boomers age and as prices for medical services grow. Health care’s share of the economy is projected to climb to 19.4% by 2027 from 17.9% in 2017, according to a federal report from February.
The rise in federal health-care spending is evident now. Last year, growth in Medicare spending rose 6.4% compared with 4.2% in 2017, reaching $750.2 billion. Enrollment in the federal health program for seniors and the disabled was largely unchanged.
One factor driving spending increases is medical prices, such as the cost of procedures. The 2.1% growth in medical prices last year, which was largely caused by inflation, was the most rapid since 2011.
Personal health-care spending grew at the same rate in 2018 as in 2017, as slower growth in the use of services was offset by faster growth in prices. Last year, the increase in U.S. per capita spending rose to 4%, up from 3.5% in 2017, in large part because of rising growth in medical prices, officials said.
In addition, retail prescription drug spending rose 2.5% last year, up from 1.4% in 2017, as spending on new cancer and autoimmune drugs was offset by a decline in price growth and more use of generic drugs.