New government health care spending tables show that hospitals are the players driving up private health insurers’ costs, and that costs are going up much faster for private employers than for other payers.
Overall spending increased 7.5% between 2022 and 2023, to $4.9 trillion, or $14,570 per person, according to new national health expenditure data from the Centers for Medicare and Medicaid Services.
Anne Martin and other staffers at the CMS national health expenditure accounts team posted the tables Wednesday and summarized the figures in an article for Health Affairs, an academic journal that focuses on health care finance and delivery systems.
The share of “gross domestic product,” or national income, going toward paying for health care and related items, such as medical research and hospital construction, rose to 17.6%, from 17.4%.
For private employers, the pain was worse: Their contributions to private health insurance premiums increased 13%, to $686 billion.
For all health benefits payers combined — private employers, federal employees, state and local employers, and the plan participants — spending increased 11%, to $1.4 trillion.
Medicare held spending growth to 8.1%, and Medicaid let spending rise just 7.9%.
The overall Consumer Price Index inflation rate for urban consumers was 4.1%.
Splitting the pie: The CMS team does not break out separate figures for employer plan spending. But, at private health insurers of all kinds, hospitals, physicians, prescription drugs, health coverage administration and dentists accounted for about 90% of spending.
Hospitals were the biggest recipients of private insurer cash. Private insurer expenditures on hospital care increased 13% between 2022 and 2023, to $559 billion.
Between 2022 and 2023, here’s what happened to the share of private health insurers’ expenditures going to the five major types of health care services and product providers:
- Hospitals: Increased 38.2%, from 37.7%
- Physicians and clinical services: Fell to 26.4%, from 26.9%
- Prescription drugs: Increased to 12%, from 11.7%
- Health insurance administration costs and profits: Increased to 10.3%, from 10.2%
- Dentists: Fell to 4.7%, from 5.1%
Here’s what happened to the same categories of health care services and product providers spending between 2013, before most major Affordable Care Act health system changes took effect, and 2023:
- Hospitals: Increased 38.2%, from 35.9%
- Physicians and clinical services: Fell to 26.4%, from 27.3%
- Prescription drugs: Fell to 12%, from 12.5%
- Health insurance administration costs and profits: Fell to 10.3%, from 11.3%
- Dentists: Fell to 4.7%, from 5.8%
Hospitals’ problems: Hospital groups say that many hospitals face are facing severe financial stress because of higher labor costs and lower payer reimbursement rates.
One question is why hospitals are facing so much stress when they are getting a bigger share of private health insurers’ spending.
The new National Health Expenditure tables do not show how much employer plans are spending on hospital care, how much different types of payers are spending per patient or how much care the typical patient needs, but the tables suggest that hospitals have been much more successful at squeezing cash from employer health plans than from Medicare and Medicaid.
Between 2013 and 2023, combined enrollment in Medicare and Medicaid plans increased 48%, to 151 million. Employer plan enrollment increased just 3% over that period, to 153 million.
Medicare and Medicaid accounted for 62.1% of hospital spending in 2023. That was up just slightly, from 61.8%, in 2023, in spite of the 48% increase in enrollment.
Employers’ share of hospital spending increased to 36.8%, from 34.8%.