Spending Trends in Private Insurance and Medicare: Variations on a Theme
September 28, 2012
Sally Coberly, PhD & William J. Scanlon, PhD, Consultant
The most recent analysis and projections of health care spending in the United States contain both good news and bad news. The good news is that the rate of growth of health care costs has slowed since 2002. The bad news is that even at slower rates of growth, health care expenditures still outpaced growth in gross domestic product (GDP), and are expected to do so indefinitely. By 2021, the nation is projected to spend $14,103 per capita on health care for a total of $4.781 trillion dollars, a sum that will represent 19.6 percent of GDP.
Taming health care costs is easier said than done. The forces that shape and contribute to cost growth vary from payer to payer, health service to service, and market to market. Rising costs in Medicare are due largely to growth in the volume and intensity of services rather than increases in payment rates or growth in the number of beneficiaries. In contrast, provider competition and consolidation play a large role in determining the prices paid by employers and private insurers. The multitude of demonstrations, pilots, and other cost containment approaches being tried by both public and private payers is testament to the challenge of slowing health care spending. Success will hinge on understanding the underlying forces that drive cost growth for each payer.
This Forum session provided an overview of spending trends in the private sector and in Medicare, teased apart some of the factors that contribute to spending growth for each payer, and explored some of the opportunities and challenges associated with taming costs for both Medicare and private payers.
Health Care Cost Institute, "Changes in Health Care Spending in 2011" (Issue Brief #3, September 2012).
Paul Ginsburg, "Wide Variation in Hospital and Physician Payment Rates Evidence of Provider Market Power" (Center for Studying Health System Change, Research Brief No. 16, November 2010).
Kaiser Family Foundation, "Health Care Costs: A Primer" (May 2012)