Guide to Buying Health Insurance Sourcebook, 1st Ed.

By Omnigraphics

This special edition provides information about understanding the importance and need for health insurance, medical billing, and a detailed study about private and public-health insurance in the United States.

• Language: English
• Publisher: Omnigraphics
• Release date: Sep 1, 2020
• ISBN: 9780780817838

Book preview

PREFACE

About This Book

Any program that helps in the payment of medical expenses is commonly termed as health insurance, and there are various categories of health insurance existing in the United States. The main categories include private and public coverage. Social welfare programs, such as Medicaid, provide assistance to people who are unable to afford health coverage. According to the 2018 statistics provided by the United States Census Bureau, around 91.5 percent had health insurance coverage, and over 27.5 million people were uninsured. The uninsured rate increased from 7.9 percent to 8.5 percent in the year 2018 when compared to 2017. In 2018, private health insurance coverage continued to be more prevalent than public coverage, covering 67.3 percent of the population and 34.4 percent of the population, respectively.

Guide to Buying Health Insurance Sourcebook, First Edition provides information about understanding the importance and need for health insurance, medical billing, and a detailed study about private- and public-health insurance in the United States including key factors for choosing a private plan, COBRA requirements and benefits, Affordable Care Act (ACA), Medicare, Medicaid, and CHIP coverage along with information on health insurance plans for preexisting medical conditions, COVID-19, and healthcare reforms in the United States. It also includes a glossary of related terms and a directory of insurance related organizations.

How to Use This Book

This book is divided into parts and chapters. Parts focus on broad areas of interest. Chapters are devoted to single topics within a part.

Part 1: Understanding the Importance and Need of Health Insurance discusses the rising healthcare costs in the United States, an overview of national healthcare expenditures, healthcare quality, healthcare coverage, and federal taxes along with information on health insurance fraud, abuse, and wastage.

Part 2: Private Health Insurance provides information about private health insurance needs, key factors for choosing a private insurance plan, additional health benefits along with workers’ right to health plan information, health insurance privacy, and tips to make the most of your health benefits.

Part 3: Publicly Sponsored Health Insurance describes patient protection and insurance programs under the Affordable Care Act, Medicare and Medicaid health coverage including CHIP, Medigap, and coverage options for the people with disabilities.

Part 4: Navigating Health Insurance describes the various process involved in the medical billing process such as patient check-in, insurance eligibility along with information on surprise-medical billing, coverage for preexisting conditions, and flexibility for workplace health plans in response to COVID-19.

Part 5: Healthcare Reforms in the United States provides information on improving access to healthcare, and the strategic plans to reform, strengthen, and modernize the nation’s healthcare system along with reforming America’s healthcare system through choice and competition that includes reducing costs with generic drugs and price transparency requirements.

Part 6: Additional Help and Information consists of a glossary of terms related to health insurance and a directory of organizations that provides further help and support.

Bibliographic Note

This volume contains documents and excerpts from publications issued by the following U.S. government agencies: Administration for Community Living (ACL); Centers for Disease Control and Prevention (CDC); Centers for Medicare & Medicaid Services (CMS); Central Intelligence Agency (CIA); Congressional Budget Office (CBO); Federal Bureau of Investigation (FBI); Federal Communications Commission (FCC); Federal Trade Commission (FTC); Internal Revenue Service (IRS); National Cancer Institute (NCI); Office of Disease Prevention and Health Promotion (ODPHP); Office of Personnel Management (OPM); Office of the National Coordinator for Health Information Technology (ONC); United States Census Bureau; U.S. Bureau of Labor Statistics (BLS); U.S. Department of Health and Human Services (HHS); U.S. Department of Justice (DOJ); U.S. Department of Labor (DOL); U.S. Food and Drug Administration (FDA); U.S. Government Publishing; and U.S. Senate Committee on Health, Education, Labor, and Pensions.

It may also contain original material produced by Omnigraphics and reviewed by medical consultants.

The photograph on the front cover is © REDPIXEL.PL/Shutterstock.

About the Health Reference Series

The Health Reference Series is designed to provide basic medical information for patients, families, caregivers, and the general public. Each volume concentrates on a particular topic and provides comprehensive coverage. This is especially important for people who may be dealing with a newly diagnosed disease or a chronic disorder in themselves or a family member. People looking for preventive guidance, information about disease warning signs, medical statistics, and risk factors for health problems will also find answers to their questions in the Health Reference Series. The Series, however, is not intended to serve as a tool for diagnosing illness, in prescribing treatments, or as a substitute for the physician–patient relationship. All people concerned about medical symptoms or the possibility of disease are encouraged to seek professional care from an appropriate healthcare provider.

A Note about Spelling and Style

Health Reference Series editors use Stedman’s Medical Dictionary as an authority for questions related to the spelling of medical terms and The Chicago Manual of Style for questions related to grammatical structures, punctuation, and other editorial concerns. Consistent adherence is not always possible, however, because the individual volumes within the Series include many documents from a wide variety of different producers, and the editor’s primary goal is to present material from each source as accurately as is possible. This sometimes means that information in different chapters or sections may follow other guidelines and alternate spelling authorities. For example, occasionally a copyright holder may require that eponymous terms be shown in possessive forms (Crohn’s disease vs. Crohn disease) or that British spelling norms be retained (leukaemia vs. leukemia).

Editorial Review

Editorial consultation services for Guide to Buying Health Insurance Sourcebook, First Edition was provided by:

David Beck, Managing Director, David Beck Associates

Health Reference Series Update Policy

The inaugural book in the Health Reference Series was the first edition of Cancer Sourcebook published in 1989. Since then, the Series has been enthusiastically received by librarians and in the medical community. In order to maintain the standard of providing high-quality health information for the layperson the editorial staff at Omnigraphics felt it was necessary to implement a policy of updating volumes when warranted.

Medical researchers have been making tremendous strides, and it is the purpose of the Health Reference Series to stay current with the most recent advances. Each decision to update a volume is made on an individual basis. Some of the considerations include how much new information is available and the feedback we receive from people who use the books. If there is a topic you would like to see added to the update list, or an area of medical concern you feel has not been adequately addressed, please write to:

Managing Editor

Health Reference Series

Omnigraphics

615 Griswold St., Ste. 520

Detroit, MI 48226

PART 1 • UNDERSTANDING THE IMPORTANCE AND NEED OF HEALTH INSURANCE

CHAPTER 1

Rising Healthcare Costs in the United States

Chapter Contents

Section 1.1—Key Drivers of Rising Healthcare Cost

Section 1.2—The Effect of Healthcare Cost Growth on the U.S. Economy

Section 1.1

Key Drivers of Rising Healthcare Cost

Key Drivers of Rising Healthcare Cost, © 2020 Omnigraphics. Reviewed July 2020.

The U.S. healthcare spending accounted for about 17.7 percent of the gross domestic product in 2018. Healthcare costs in the United States have been rising for decades and are expected to keep rising in the coming years. According to a 2019 study, healthcare spending in the United States rose nearly a trillion dollars between the years 1996 and 2015. It was reported by the American Medical Association (AMA) that healthcare spending in the United States was $3.5 trillion, or about $11,000 per person in 2017. These costs are expected to climb to $6 trillion or about $17,000 per person by 2027.

There are five major factors that affect the cost of healthcare in the United States as per the Journal of the American Medical Association:

Healthcare finance

Growing population and disease prevalence

Lack of cost and quality information

Medical service utilization

Service price and consolidation

According to the study, the spending can be broken down into 11 categories:

Hospital care(32.7%)

Physician services(15.6%)

Other personal healthcare costs(15.1%)

Prescription drugs(9.5%)

Health insurance costs(6.6%)

Nursing care facilities(4.8%)

Investment spending(4.8%)

Clinical services(4.3%)

Home healthcare(2.8%)

Government’s public-health activities(2.5%)

Government administration(1.3%)

Hospital and Physician Prices

Traditional Medicare and most other insurers pay doctors, hospitals, and other medical providers under a fee-for-service system that compensates them for each test, procedure, or consultation. It has been reported that this leads to overtreatment, such as undergoing repetitive tests. There are improved provisions in the federal health law, such as the Affordable Care Act (ACA) and among some private insurers to provide payments for a specific condition to streamline costs, such as a knee replacement, or a patient’s overall treatment for any medical condition. Medical systems and doctors have started using electronic medical records to enhance coordination and lower nonessential, repetitive tests.

According to data from the Organization for Economic Cooperation and Development (OECD), the average unit cost for physicians, hospitals, facilities, and drugs are the highest in the United States when compared to other countries.

Increase in Population and Chronic Illnesses

The cost of healthcare increases when the population expands. The increase in the aging population tends to require additional medical services resulting in higher medical expenses. Studies show that 50 percent of the increase in healthcare spending comes from higher costs for services, particularly inpatient hospital care. Population growth (23%) and population aging (12%) are the two next highest factors when it comes to higher healthcare spending.

The prevalence of chronic conditions, such as diabetes and heart disease, also has a direct impact on increases in the cost of medical care, contributing to 85 percent of healthcare costs. Studies also show the increased cost of diabetes medications was responsible for $44.4 billion of the total $64.4 billion increase in costs to treat diabetes. Moreover, almost half the U.S. population has one or more chronic conditions, including asthma, heart disease, or diabetes, which contribute to an increase in healthcare spending. Two-thirds of adults in the United States are either overweight or obese, leading to chronic illness and further medical spending. Also, older people require more medical care as the baby boom generation moves toward retirement. Their enrollment in Medicare is set to grow by an average of 1.6 million people annually.

Expensive Technologies and Procedures

Medical advances can help people get better treatment, prevent disease, and delay death, but they can also increase healthcare spending. Most of the new technology costs more than the price of the products they replace. Advances in medical technology increase the health system efficiency and also promote unnecessary utilization of expensive treatments in free-for-service (FFS) models. Most Americans choose the most expensive technologies and procedures when receiving treatment. For instance, according to the OECD data, magnetic resonance imaging (MRI) scans in the United States are taken twice as often, when compared with average MRIs taken in other countries.

Additionally, cultural biases that often favor more and prolonged care, regardless of its effectiveness, also contribute to an increase in healthcare expenses.

Lack of Cost and Quality Information

Limited consensus on standards of care includes a lack of transparency about cost and quality, along with limited reliable information, that enables a fair comparison of healthcare quality and outcomes. This results in patients and physicians being unable to utilize the most cost-effective treatments. It also makes it difficult to know the actual cost of healthcare due to fewer details and complicated medical bills. Patients also have limited capabilities to participate in the cost decision-making process of their care. For example, The Wall Street Journal reported that a hospital had found that it was charging more than $50,000 for a knee-replacement operation that actually costs between $7,300 and $10,550.

Provider Consolidation and Insurance Costs

The rising cost of health insurance premiums is usually one of the main areas of increased healthcare costs. According to the National Conference of State Legislatures (NCSL), in 2018, the average annual premium for family healthcare coverage rose by 5 percent to $19,616. The average increase in premium costs was $201 for people on a private plan or a healthcare exchange in 2018. Government policy and lifestyle changes were the two most common reasons for these increases. Government programs such as Medicare and Medicaid have also increased overall demand for medical services, leading to higher prices. However, starting from 2010 to 2017, the Affordable Care Act (ACA) is known to have reduced healthcare spending by a total of $2.3 trillion.

The growing provider consolidation that involves mergers or partnerships among medical providers or insurers can improve the delivery of care. Still, the misuse of market power by near-monopolies in some markets can increase the price of service. Larger insurers are gaining market share across the nation, and potentially, insurers could negotiate lower provider reimbursement.

References

Hodgin, Scott. What Are the Primary Drivers of Healthcare Costs? Insight, March 7, 2019.

9 Drivers of High Healthcare Costs in the U.S. Becker’s Healthcare, January 9, 2014.

Probasco, Jim. Why Do Healthcare Costs Keep Rising? Investopedia, October 16, 2019.

Appleby, Julie. Seven Factors Driving Up Your Health Care Costs, Kaiser Family Foundation, October 24, 2012.

Section 1.2

The Effect of Healthcare Cost Growth on the U.S. Economy

The Effect of Healthcare Cost Growth on the U.S. Economy, © 2020 Omnigraphics. Reviewed July 2020.

Rising healthcare costs have generated concerns that continued growth could adversely affect the nation’s economy, as well as pose problems for particular sectors of the economy, such as employers and households. This report evaluated how increased spending on healthcare affected aggregate economic indicators and individual sectors. As a basis for this investigation, a thorough and detailed review of the literature was conducted that included anecdotal evidence, survey findings, and the peer-reviewed literature. The literature review highlighted the economic effects of healthcare cost growth and identified possible mechanisms through which cost growth could affect the aggregate economy, as well as government, households, and business.

Healthcare Expenses versus Overall Economy

The healthcare sector plays an important role in enriching people’s lives and well-being and is one of the most significant contributors to the country’s economy.

The overall economic growth per annum in the United States for the year 2018 was 2.9 percent while the growth in healthcare spending 4.6 percent. This means a larger share of expenses are being devoted to the healthcare sector thus creating an impact on the overall economy. The public sector that includes the federal, state, and municipal governments are faced with expenditure rising more significantly than revenues, placing high scrutiny on all discretionary spending, especially in healthcare. Economists believe that the increase in the amount of healthcare expenses lowers gross domestic product (GDP) and overall employment of a country. The impacts of healthcare spending on interest rates and its impact on industry-wide economic results depend on the source of the federal healthcare budget funds. The findings of one analysis using econometric models showed that deficit financing impacts manufacturing and capital goods sectors negatively, and that payroll tax financing harms the consumer service industries overwhelmingly.

Nevertheless, it is understood that healthcare spending has a neutral, if not beneficial, effect on the economy. Improved healthcare spending is seen as a transition under this view. These transitions bring real growth in employment and financial prosperity for largely American-owned companies. In a related perspective, the Congressional Budget Office (CBO) notes that as revenue rises, consumers usually tend to distribute a larger portion of their resources on healthcare services compared to a smaller portion on other goods and services.

Factors That Increase Healthcare Spending

Advances in Medical Technology

Although major advancements have been made in medical technology, many of these developments have increased expenditure rather than resulting in cost saving. Healthcare opportunities have advanced greatly to provide enhanced treatment options for several diseases, which was not available previously. Such modern therapies not only expands and enriches the quality of life but also creates a huge hole in our pockets.

Population Increase

Changes in the population may have increased healthcare demand. Birth rates have fallen particularly as social norms for women have evolved. Fifty years ago, the average woman had about three kids, compared to two kids today. This fall in birth rates, coupled with rising life expectancy, has changed the relative sizes of different age groups. The percentage of the U.S. population aged 65 or older rose from 9 percent in 1960 to 15 percent in 2015. As elders are more involved with the healthcare industry than the younger generation, the market value of the sector rises rapidly.

Increase in Spending

Society has become richer over time, and that change may have increased the share of healthcare expenditures. Adjusted for inflation, the average income per person is today more than three times what it was in 1960. As income increases, the expenses also increase proportionately. People who are wealthier tend to use more expensive medical facilities and products.

Conclusion

The United States spends nearly twice as much on health insurance as any other developed country. In 2016, healthcare spending accounted for 18 percent of the nation’s GDP, or $3.3 trillion, and companies and families paid for almost half of the investment. Medicare and Medicaid currently account for around 25 percent of federal government spending, and it is anticipated that both figures will keep increasing. Actuarial Medicare and Services Centers expect that by 2026 national health budget increase will reach 5.5 percent per annum. That growth would comfortably surpass GDP growth for the same period, and by 2026 healthcare spending is projected to consume nearly 20 percent of GDP.

References

Commins, John. Healthcare Spending at 20% of GDP? That’s an Economy-Wide Problem, Health Leaders, September 19, 2018.

Gruessner, Vera. Is Rising U.S. Healthcare Spending Burdening the Economy? Health Payer Intelligence, April 25, 2016.

Nunn, Ryan; Parsons, Jana; Shambaugh, Jay. A Dozen Facts about the Economics of the U.S. Healthcare System, Brookings, March 10, 2020.

CHAPTER 2

Role of Insurance in Improving Access and Equity in Healthcare

Health Insurance and Access to Care

Health insurance coverage is an important determinant of access to healthcare. Uninsured children and nonelderly adults are substantially less likely to have a usual source of healthcare or a recent healthcare visit than their insured counterparts. The majority of persons below 65 years of age have coverage through private employer-sponsored group health insurance. Private-health insurance may also be purchased on an individual basis. Starting in 2014, the U.S. adults could buy a private-health insurance plan through the health insurance marketplace or state-based exchanges established as part of the Affordable Care Act (ACA). Moreover, some states opted to expand Medicaid coverage to low-income adults.

Health Insurance Data

The National Health Interview Survey (NHIS) collected comprehensive data on health insurance coverage. Three estimates of lack of health insurance coverage are provided quarterly:

uninsured at the time of the interview

uninsured at least part of the year prior to the interview

uninsured for more than a year at the time of the interview

Figure 2.1. Percentage of Adults Aged 18–64 Who Were Uninsured or Had Private or Public Coverage: United States, 1997 June 2016

Data were also provided on public and private coverage for those currently insured, including data on enrollment through the Health Insurance Marketplace and state-based exchanges, and in consumer-directed health plans. For 2015, the NHIS reported state-specific health insurance estimates for all 50 states and the District of Columbia for persons of all ages, persons under age 65, and adults aged 18−64. State-specific estimates were reported for 34 states on coverage for children aged 0–17 years.

National Health Interview Survey (NHIS) data on uninsured adults aged 18–64 by race and ethnicity for the first six months of 2016 show:

A total of 24.8 percent of Hispanic, 14.8 percent of non-Hispanic black, 8.7 percent of non-Hispanic white, and 7.2 percent of non-Hispanic-Asian adults lacked health insurance coverage at the time of interview. Hispanic adults had the greatest percentage point decrease in the uninsured rate between 2013 (40.6%) and the first six months of 2016 (24.8%).

National Health Insurance Scheme (NHIS) data on health insurance coverage for adults aged 18–64 from 1997 through the first six months of 2016 show:

The percentage of uninsured decreased from 20.4 percent in 2013 to 12.4 percent in the first six months of 2016. During this 3-year period, corresponding increases were seen in both public and private coverage among adults aged 18–64.

Access to Care Data

Clinical experts note that with access to timely and appropriate ambulatory care, patients may be able to prevent illness, control acute episodes, or manage chronic conditions to avoid exacerbating or complicating those conditions. Although health insurance coverage levels provide a strong indication of Americans’ access to healthcare, other measures enhance understanding of this issue and point to solutions to improve access.

Usual Place to Go for Medical Care

National Health Insurance Scheme (NHIS) data for January–June 2016 show:

The percentage of persons of all ages who had a usual place to go for medical care decreased from 87.9 percent in 2003 to 85.4 percent in 2010 and then increased to 87.9 percent in January–June 2016.

Data by race and ethnicity show:

The percentage of persons with a usual place to go for medical care by race and ethnicity in the first half of 2016 was 82.5 percent for Hispanic, 89.4 percent for non-Hispanic white, and 85.8 percent for non-Hispanic black persons.

Office-Based Physician Practices

Data from the NCHS’ National Healthcare Surveys provide insights into access to care. The percentage of physicians accepting new patients—which varies by type of payment—is a measure of physician capacity to meet increased demand.

Data for 2014 show:

The majority of physicians reported that they accepted new patients with private insurance (91%), compared with 70 percent who accepted new patients with Medicaid.

Twenty-one states had physician acceptance rates for new Medicaid patients higher than the national average of 70 percent.

Physician acceptance rates for Medicaid patients were lower than the national average in four states. A previous study using NCHS data found that higher state Medicaid-to-Medicare fee ratios were correlated with greater acceptance of new Medicaid patients.

Health Insurance and Access to Care Data Sources

National Health Interview Survey. Collects information on the nation’s health through personal household interviews that measure health status and disability, selected conditions, insurance coverage, access to care, use of health services, immunizations, health behaviors, injury, and the ability to perform daily activities.

National Healthcare Surveys. A family of healthcare provider surveys that together obtain information about the facilities that supply healthcare, the services rendered, and the characteristics of the patients served. Sites surveyed include hospitals, office-based physician practices, emergency and outpatient departments, ambulatory surgery centers (ASCs), nursing homes, and home health and hospice agencies.

This chapter includes text excerpted from Health Insurance and Access to Care, Centers for Disease Control and Prevention (CDC), February 15, 2017.

CHAPTER 3

National Healthcare Expenditures: An Overview

Chapter Contents

Section 3.1—Components of Healthcare Spending

Section 3.2—How Much Is Healthcare Spending Projected to Grow?

Section 3.1

Components of Healthcare Spending

This section includes text excerpted from National Health Expenditures 2018 Highlights, Centers for Medicare & Medicaid Services (CMS), December 5, 2019.

The U.S. healthcare spending increased 4.6 percent to reach $3.6 trillion, or $11,172 per person in 2018. The growth in 2018 was faster than in 2017 when healthcare spending increased 4.2 percent. The faster growth in 2018 was associated with faster growth in the net cost of health insurance, which increased 13.2 percent following growth of 4.3 percent in 2017, due primarily to the reinstatement of the health insurance tax in 2018. The overall share of gross domestic product (GDP) related to healthcare spending was 17.7 percent in 2018, down from 17.9 percent in 2017. The insured share of the population was 90.6 percent in 2018 and 90.8 percent in 2017, as the number of uninsured increased by 1 million to 30.7 million in 2018.

Health Spending by Type of Service or Product

Hospital care (33% share). Spending for hospital care services increased at about the same rate in 2018 as in 2017 (4.5% and 4.7%, respectively) and reached $1.2 trillion in 2018. Faster growth in hospital prices was partly offset by slower growth in nonprice factors, such as the use and intensity of services.

Physician and clinical services (20% share). Spending on physician and clinical services increased 4.1 percent to $725.6 billion in 2018. This was slower than the 4.7 percent growth for physician and clinical services in 2017 and was largely due to a slowdown in nonprice factors such as the use and intensity of services. Although slowing, growth in clinical services continued to outpace the growth in physician services in 2018.

Retail prescription drugs (9% share). Growth in retail prescription drug spending accelerated in 2018, increasing 2.5 percent to $335 billion. The faster growth in 2018 followed a 1.4 percent growth in 2017. In 2018, faster growth in nonprice factors helped to drive the increase in total retail prescription drug spending growth, while retail prescription drug prices declined by one percent.

Other health, residential, and personal care services (5% share). This category includes expenditures for medical services that are generally delivered by providers in nontraditional settings such as schools, community centers, and the workplace; as well as by ambulance providers and residential mental health and substance abuse facilities. Spending for other health, residential, and personal care services grew 4.6 percent in 2018 to $191.6 billion after increasing 5.5 percent in 2017. The deceleration was driven largely by slower growth in Medicaid nonwaiver spending.

Nursing care facilities and continuing care retirement communities (5% share). Growth in spending for services provided at freestanding nursing care facilities and continuing care retirement communities decelerated in 2018, increasing 1.4 percent to $168.5 billion compared to two percent growth in 2017. The slower growth in 2018 is largely attributable to slower spending growth in private-health insurance spending and a decline in Medicaid spending.

Dental services (4% share). Spending for dental services increased 4.6 percent in 2018 to $135.6 billion, accelerating from 3.8 percent growth in 2017. Private-health insurance (which accounted for 46% of dental spending) increased 5.7 percent in 2018—faster growth than 4.6 percent in 2017. Out-of-pocket (OOP) spending for dental services (which accounted for 40 percent of dental spending) also experienced faster growth, increasing 3.5 percent in 2018 from 2.1 percent in 2017.

Home healthcare (3% share). Spending for services provided by freestanding home healthcare agencies increased 5.2 percent in 2018, a higher rate than in 2017 of 4.5 percent, to $102.2 billion. Slower growth in Medicaid spending and private-health insurance spending was more than offset by faster growth in Medicare and out-of-pocket spending. Medicare and Medicaid together made up 75 percent of home health spending in 2018.

Other professional services (3% share). Spending for other professional services reached $103.9 billion in 2018 and increased 6.5 percent, a faster rate of growth compared to the increase of 5.2 percent in 2017. Spending in this category includes establishments of independent health practitioners (except physicians and dentists) that primarily provide services such as physical therapy, optometry, podiatry, or chiropractic medicine.

Other nondurable medical products (2% share). Retail spending for other nondurable medical products, such as over-the-counter medicines, medical instruments, and surgical dressings, increased 3.6 percent to $66.4 billion in 2018, compared to a rate of 2.2 percent in 2017.

Durable medical equipment (2% share). Retail spending for durable medical equipment, which includes items such as contact lenses, eyeglasses, and hearing aids, reached $54.9 billion in 2018 and increased 4.7 percent, which was faster than the 2.9 percent growth in 2017. The faster growth was driven by an acceleration in out-of-pocket spending (a 46% share) as well as strong growth in Medicare spending (a 16% share).

Health Spending by Major Sources of Funds

Private-health insurance (34% share). Private-health insurance spending increased 5.8 percent to $1.2 trillion in 2018, which was faster than 4.9 percent growth in 2017. The acceleration was driven in part by faster growth in the net cost of private-health insurance, which was primarily due to reinstatement of the health insurance tax in 2018 following a one-year moratorium in 2017. On a per enrollee basis, spending for private-health insurance was $6,199 in 2018, an increase of 6.7 percent over 2017.

Medicare (21% share). Medicare spending increased 6.4 percent to $750.2 billion in 2018, compared to a rate of 4.2 percent in 2017. The growth in 2018 reflected faster growth in Medicare spending for nonpersonal healthcare, which includes government administration and the net cost of insurance for Medicare private-health plans. The acceleration in the net cost of insurance was largely a result of private Part C and Part D plans adjusting their premiums to reflect the reinstatement of the health insurance tax. On a per enrollee basis, spending for Medicare was $12,784 in 2018, an increase of 3.7 percent over 2017.

Medicaid (16% share). Total Medicaid spending accelerated in 2018, increasing three percent to $597.4 billion compared to growth of 2.6 percent in 2017. The faster growth in 2018 was influenced by faster growth in the net cost of insurance, again influenced in part by the reinstatement of the health insurance tax. On a per enrollee basis, spending for Medicaid was $8,201 in 2018, an increase of two percent over 2017.

Out-of-pocket (10% share). Out-of-pocket spending grew 2.8 percent in 2018 to $375.6 billion, which was faster than 2.2 percent growth in 2017.

Health Spending by Type of Sponsor

In 2018, the federal government and households each accounted 28 percent of healthcare spending (the largest shares) followed by private businesses (20%), state and local governments (17%), and other private revenues (7%).

Federal government spending on health accelerated in 2018, increasing 5.6 percent after 2.8 percent growth in 2017. The acceleration was largely associated with faster growth in the federally-sponsored portions of Medicare and Medicaid expenditures.

Households’ healthcare spending grew at a rate of 4.4 percent, the same rate experienced in 2017. Out-of-pocket expenditures, the largest category of household spending (36% share), increased 2.8 percent in 2018 compared to growth of 2.2 percent in 2017. Concurrently, household contributions to employer-sponsored private-health insurance premiums (27% share) decelerated from 6.8 percent growth in 2017 to 3.4 percent in 2018.

State and local government healthcare spending grew 2.5 percent in 2018 after a rate of 3.6 percent in 2017. The deceleration in 2018 was driven by slower growth in state and local Medicaid spending.

Spending on healthcare by private businesses increased 6.2 percent in 2018, accelerating from growth of 4.8 percent in 2017. The largest category of private business’ healthcare costs are employer-sponsored premiums (77% share), which increased 7.2 percent in 2018.

Type of sponsor is defined as the entity that is ultimately responsible for financing the healthcare bill, such as private businesses, households, and governments. These sponsors pay health insurance premiums and out-of-pocket costs, or finance healthcare through dedicated taxes and/or general revenues.

Section 3.2

How Much Is Healthcare Spending Projected to Grow?

This section includes text excerpted from National Health Expenditure Projections 2018–2027, Centers for Medicare & Medicaid Services (CMS), February 22, 2019.

Major Findings for National Health Expenditures: 2018–27

Under current law, national health spending is projected to grow at an average rate of 5.5 percent per year for 2018–27 and to reach nearly $6 trillion by 2027.

Health spending is projected to grow 0.8 percentage point faster than gross domestic product (GDP) per year over the 2018–27 period; as a result, the health share of GDP is expected to rise from 17.9 percent in 2017 to 19.4 percent by 2027.

Key economic and demographic factors fundamental to the health sector are anticipated to be the major drivers during 2018–27.

Prices for healthcare goods and services are projected to grow somewhat faster over 2018-27 (2.5% compared to 1.1% for 2014–17).

As a result of comparatively higher projected enrollment growth, average annual spending growth in Medicare (7.4%) is expected to exceed that of Medicaid (5.5%) and private-health insurance (4.8%).

The Medicare enrollment impacts are the key reason the share of healthcare spending sponsored by federal, state, and