Medicare Advantage 101: New policy series explains Medicare Advantage and its role within the Medicare system.
A new report from the Centers for Medicare & Medicaid Services (CMS) indicates that in 2019, national health care expenditures grew by 4.6%, similar to the 2018 growth rate of 4.7%. However, this relative stability is because spending increases last year were offset by lower costs in other areas, not absent.
The annual CMS expenditures report measures the total dollar amount of health care consumption in the U.S. It presents these estimates in several ways, including by the type of service and the program.
The 2019 data shows that significant growth in spending for certain medical goods and services—namely hospital care, physician and clinical services, and retail purchases of prescription drugs—was largely balanced by the suspension of a tax on health insurers, which lowered net costs.
Created by the Affordable Care Act (ACA), the health insurance tax is a fixed amount, allocated among insurers in proportion to their market share. In effect from 2014 through 2016, Congress approved a one-year moratorium for 2017, and the tax resumed in 2018 at a cost of about $14.3 billion. Congress suspended the tax once again in 2019.
When broken down by program, the 4.6% rate of increase was marked by a slightly faster annual growth rate in Medicare spending. Total program expenditures, for fee-for-service (FFS) and private plans combined, grew 6.7% in 2019 compared to 6.3% in 2018.
Per enrollee, the differences in Medicare expenditures are stark. Private plan spending increased from 4.3% in 2018 to 6.3% in 2019, despite the impact of the health insurance tax moratorium. By contrast, Medicare FFS per enrollee spending slowed. The 2.4% growth rate in 2019 was down from 3% in 2018.
These trends, including the continuing hike in Medicare Advantage spending relative to FFS Medicare and the acceleration of consumer out-of-pocket spending, underscore the need to improve Medicare’s programmatic integrity, sustainability, and affordability. Medicare Rights will continue to work to advance solutions to protect and strengthen Medicare for current and future beneficiaries
Notably the 2019 analysis does not capture the effects of the coronavirus pandemic on health care spending. Future reports are expected to reflect those changes.
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