CMS: Health spending increased 4.6% in 2019 to $3.8T, slightly below 2018 levels

stethoscope on money
The suspension of the health insurance tax in 2019 helped offset higher use of healthcare service spending, a new study found. (Getty/Maudib)

Healthcare spending increased 4.6% in 2019 to $3.8 trillion as the suspension of the health insurance tax helped offset faster growth in hospital, physician and clinical service spending.

The Centers for Medicare & Medicaid Services (CMS) released the national healthcare spending data for 2019 in a study published in Health Affairs on Wednesday. As such, they do not include any of the impacts of the COVID-19 pandemic.

The rate of growth was slightly in line with the 4.7% growth seen in 2018 and consistent with the annual spending growth rate of 4.5% seen since 2016.

"2019 saw faster growth in use and intensity of services and slower growth of medical prices," said Anne Martin, lead author of the study and an economist in CMS’ National Health Statistics Group, on a call with reporters Wednesday.

"Use of hospital care, physician and clinical services and retail and prescription drugs increased in faster rate in 2019 compared with 2018," she said. 

Last year, the share of the economy devoted to healthcare spending was roughly the same percentage (17.7%) as the rate in 2018, which was 17.6%.

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Spending for personal healthcare such as goods and services accounted for 84% of total healthcare spending last year and increased 5.2%, which is faster than the 4.1% increase that occurred in 2018.

The faster growth was largely due to higher spending in hospital care, where spending grew by 6.2% compared with a 4.2% increase in 2018. Retail prescription drug spending also grew by 5.7% in 2019, a major increase from 3.8% growth in 2018.

Physician and clinical service spending slightly increased by 4.6% in 2019, up from 4% growth in 2018.

Medical prices also increased 1.1% in 2019 compared with 2.3% two years ago. However, the use and intensity of services increased 2.5% last year, faster than the 1.4% growth in 2018.

But the suspension of the Affordable Care Act’s health insurance tax for 2019 led to much slower growth in health insurance spending, which had an increase of 3.7% last year. That is roughly half of the 5.6% growth rate for 2018, the study said. The tax went back into effect this year, but Congress fully repealed it starting in 2021. 

Medicare spending, however, was roughly in line with 2018 as total spending increased 6.7% in 2019 and grew by 6.3% two years ago. Medicaid spending growth was also roughly the same last year (2.9% in 2019 compared to 3.1% in 2018).

Spending on Medicare Advantage plans increased 7.7%, similar to the same growth rate of 7.9% in 2018.

Medicare also spent much more on drugs (a 7.6% increase in 2019) compared with 4% in 2018.

A major reason for the acceleration was the use of higher cost of specialty drugs.

“Beneficiaries who use these drugs tend to hit their catastrophic benefit limit faster, which means Medicare subsidies more for those drugs,” Martin said.  

It remains unclear how COVID-19 will impact healthcare spending for 2020, but there are already reports of major drops in healthcare use due to the pandemic.

“Although the healthcare sector is not yet known, it is certain that it will have profound consequences on the provision and consumption of healthcare goods and services, as well as on the payers, programs, and sponsors that fund that care in 2020 and perhaps beyond,” the study said.