Retail drug prices fell slightly last year for the first time in four decades, while the cost of private health insurance grew at a rapid pace, according to an authoritative government study of health care spending.
The study, produced by actuaries at the U.S. Centers for Medicare and Medicaid Services, shows a 1 percent decrease in retail drug prices for 2018 as consumers relied more heavily on generic medicines and prices rose relatively slowly for many brand-name pharmaceuticals.
Still, as President Trump and bipartisan members of Congress regard lowering drug prices as a political cause, total expenditures on prescription drugs rose 2.5 percent last year, to $335 billion.
Health spending overall climbed 4.6 percent in 2018 to $3.6 trillion, accounting for nearly 18 percent of the U.S. economy, according to the study, published in the journal Health Affairs. Health care expenditures amounted to $11,172 per person.
The slowing of drug price increases “means buyers are being smarter and more sensitive” looking for generic alternatives and other ways to avoid high-priced medicines, said Dan Mendelson, founder of Avalere Health, a Washington-based consulting firm.
“It’s tempting to declare victory when spending growth attenuates,” Mendelson said. But in part because health plans are shifting more of the burden to their customers, “the polling this year very clearly shows we are in a health-care affordability crisis, and consumers are facing a big squeeze on their finances,” he said.
The report comes as health care remains a dominant public concern in the lead-up to the 2020 elections, with one recent poll finding that 53 percent of registered voters said the issue will be “extremely important” in their choice for president – about tied with the economy and higher than eight other major issues.
Within the large Democratic presidential primary field, a cleavage has emerged over how far to go in reshaping the nation’s health care system. Progressives, such as Sens. Bernie Sanders, I-Vt., and Elizabeth Warren of Massachusetts, favor a broad restructuring that would give the government a far greater role in paying for health services. More moderate Democrats, including former vice president Joe Biden and South Bend, Indiana, Mayor Peter Buttigieg prefer to build on insurance expansions brought by the 2010 Affordable Care Act, while giving people the choice of buying into a new government insurance plan.
The health expenditures study shows a continuing contraction of health coverage, with about 1 million more people uninsured in 2018, about the same drop as the previous year.
The study also shows that the portion of health spending that consumers are directly responsible for – out-of-pocket costs for insurance deductibles, copayments and other fees – increased last year by 2.8 percent. That growth was slightly more rapid than a 2.2 percent increase in 2017.
The cost per person for private health insurance spiked last year by an average of 6.7 percent, the most rapid increase since 2004.
In a conference call with reporters, Micah Hartman, a CMS statistician who is the report’s lead author, said a main reason is that Congress reinstated for 2018 a ACA tax on health insurers that it had lifted the year before. He and other federal statisticians and economists could not say exactly how much of the increase was caused by that tax.
The drop in retail drug prices was the first since 1973, federal officials said.
Richard Frank, a Harvard University health economist who held senior roles at HHS during the Obama administration, said the Food and Drug Administration’s recent speed-up in approving generic drugs is “one big thing,” while the price of generics has been falling for years.
Frank said that the trend contrasts with the fact that emerging specialty drugs “are going up and going up fast” and are “the thing everyone is fighting about.”
In addition, he noted, the study measures the retail price of pharmaceuticals, while consumers tend to pay higher list prices for their deductibles and copayments.
Send questions/comments to the editors.
