Slow Growth in Medicare and Medicaid Spending Per Enrollee Has Implications for Policy Debates

Medicare and Medicaid contain per enrollee health spending growth better than private insurance.

The Issue

Since 2006, national health expenditure (NHE) growth has been slow relative to historic growth rates. Annual spending growth between 2006 and 2017 averaged 5.2 percent for Medicare, 6 percent for Medicaid, and 4.4 percent for private health insurance. The Centers for Medicare and Medicaid Services (CMS) project much faster growth in Medicare and Medicaid spending per enrollee from 2017 to 2026 than we have seen in the past decade.

These projections raise concerns about the sustainability of current trends and have been cited in proposals to dramatically restructure both programs. However, Medicare and Medicaid better contain per enrollee health spending growth than private insurance.

Key Findings

• Medicare and Medicaid spending per enrollee grew 2.4 percent per year and 1.6 percent per year, respectively, compared to 4.4 percent per year for private insurance. This can be attributed to much faster enrollment growth in public programs compared to private coverage.
• Average annual enrollment increased 2.8 percent for Medicare and 4.3 percent for Medicaid while private coverage enrollment stayed relatively flat.
• The authors found that changes in specific types of health care spending affected Medicare, Medicaid, and private insurers differently, especially for prescription drugs, administrative costs, and hospital services.

Conclusion

The authors conclude that Medicare and Medicaid have successfully moderated growth in spending per enrollee over the last decade and do not require major restructuring to lower national health spending. Overall, Medicare and Medicaid are doing a good job of keeping per capita costs under control, and the continuation of recent policies is critical to sustain this control. The larger cost containment problems the nation faces are in the private insurance market.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research.