U.S. health care expenditures rose 4.6% to $3.8 trillion during 2019, growing at a similar rate to 2018, which saw a 4.7% increase, according to a new study in the journal Health Affairs. These data come at a time when hospices are working to demonstrate their cost saving capabilities to payers in value-based payment programs, such as Medicare Advantage plans.
Health care spending last year represented 17.6% of the U.S. economy, according to the report. About 61% of the cost increases were attributable to spending on hospital care, physician and clinical services and retail prescription drug purchases. These were offset somewhat by the suspension of the health care insurance tax in 2019.
“Health care spending in 2019 increased at about the same rate as it had in 2018 and was similar to the average annual growth since 2016,” said Anne Martin, an economist in the U.S. Centers for Medicare & Medicaid Services (CMS) Office of the Actuary and co-author of the Health Affairs article. ”
Medicare expenditures rose at a higher rate than the overall national numbers, a 6.7% increase up from 6.3% in 2018. Medicare pays for the vast majority of hospice care in the United States. Spending for senior care grew 0.5% in 2019 and represented 12% of total health care spending. Total Medicare costs reached $799.4 billion, or 21% of the national spend.
Demonstrating their cost-saving potential to payers is a key priority for hospices preparing to participate in value-based payment programs launching in 2021, including the value-based insurance design model demonstration, or Medicare hospice carve-in, and the Primary Cares initiative.
Patients who receive hospice earlier in the course of their illnesses saved an average of $14,000 in health care costs during the last three months of life compared to patients who were admitted for a mid-term stay, according to research from health care data analytics firm Trella Health.
Patients who did not elect hospice accrued $27,455 more in health care costs than patients who received an early hospice referral, the study found. These patients were also 10 times more likely to be admitted to the hospital.
Expansion of palliative care could also yield significant cost savings. Hospices provide about 50% of community-based palliative care in the United States, according to the Center to Advance Palliative Care.
Palliative care consultations can reduce direct hospital costs by $3,000 per patient admitted, and up to $4,800 per admission for patients suffering from four or more diagnoses, according to a 2018 study. It can also reduce the frequency of 911 calls, emergency department visits, and unnecessary hospitalizations.
Home-based palliative care could reduce societal health care costs by $103 billion within the next 20 years, the nonprofit economic research group Florida TaxWatch said in a report.
Being 2019 numbers, the health care expenditure data do not reflect the impact of the COVID-19 pandemic, but one can expect the impact for the 2020 spend to be huge.
“This relative stability in health care spending growth over the last four years preceded the COVID-19 pandemic in 2020,” Martin said. “The full impact of the pandemic on the health care sector is still not known, but it will certainly have profound consequences on the provision and consumption of health care in 2020 and perhaps beyond.”