Health Care Spending Hits Record High, Even With 1 Million Fewer Insured

Health Care Spending Hits Record High, Even With 1 Million Fewer Insured

Printer-friendly version
Plus, after Trump’s cuts, US taxes fourth lowest in developed world
Thursday, December 5, 2019

After Trump’s Cuts, US Taxes Are Fourth Lowest in the Developed World

Total U.S. taxes as a share of the economy fell to 24.3% last year, thanks in large part to the tax cuts signed into law by President Trump in 2017, the Organization for Economic Cooperation and Development said Thursday in a new report.

The total U.S. tax burden fell 2.5 percentage points in 2018 compared to the year before, ranking the nation’s tax-to-GDP ratio near the bottom of the 36 OECD’s member nations. (The report is based on preliminary data from 34 countries, with no information available yet for Australia and Japan.)

U.S. tax levels are 10 percentage points below the OECD average, and about half those of France, which has the highest tax-to-GDP ratio at 46.1%. Twenty years ago, the U.S. was close to the middle of the pack, with a higher tax burden than Switzerland and South Korea. Now, only Ireland, Chile and Mexico have a lower tax burden.

It’s not just Trump: The latest reduction in the U.S. tax burden marks the culmination of a long-term effort by the right to slash taxes, including President George W. Bush’s tax cuts in 2001 and 2003, The Wall Street Journal’s Richard Rubin said Thursday. “The net effect of fiscal policy this century has been lower taxes and larger budget deficits,” Rubin noted.

Most OECD nations have had a different experience: Over the last 10 years, 26 OECD nations have seen their tax-to-GDP ratios increase, the report said. One reason for the discrepancy is the unusual tax and welfare systems in the U.S. "The U.S. fiscal system operates differently from those in much of the rest of the world,” the Journal’s Rubin wrote. “Other nations rely on value-added taxes to finance generous and universal social benefits, including health care and parental leave. ... The U.S. has no value-added tax and offers a less robust social-safety net."

Democratic tax plans would raise the tax ratio: If the Democratic presidential candidates agree on one thing, it’s that they all want to raise taxes. They disagree, however, on how to go about doing so, and how to spend the revenues the taxes would raise. Joe Biden, for example, proposes to raise $3.2 trillion over 10 years through relatively modest tax increases on corporations and the wealthy, while Elizabeth Warren wants to raise nearly 10 times that amount with much more aggressive tax hikes.

Jim Tankersley of The New York Times estimated the effect that the different Democratic tax plans would have on the country’s tax-to-GDP ratio. Biden’s plan would move the U.S. about one slot higher in the OECD ranking, Tankersley said. Warren’s plan, on the other hand, would “vault it above the OECD average, in the ballpark of Norway and the Netherlands,” he wrote Thursday, adding that such a move “would be a sea change in taxation for the US economy.”

Chart of the Day

We told you yesterday about Joe Biden’s proposal to raise roughly $3.2 trillion over 10 years from taxes on the rich and corporations in order to pay for the spending in his health care, climate and education plans. Vox’s Matthew Yglesias provides a more detailed breakdown of the 10 tax increases Biden has proposed and how much revenue they’re expected to generate, including the chart below.

Yglesias makes one broader point also worth highlighting: “Despite the disagreement about how far to go, all Democrats these days are basically reading from the same playbook, one that says Reagan-era conventional wisdom about the relationship between taxes and growth is wrong.”

Read the full explainer at Vox.

US Now Spends More Than $11,000 per Person on Health Care

U.S. spending on health care grew to $3.65 trillion last year, climbing above $11,000 per person for the first time, according to a new report from Medicare actuaries. Spending rose 4.6% in 2018, faster than the 4.2% increase in 2017, even as the number of Americans without health coverage rose by 1 million for the second year in a row, reaching 30.7 million.

The growth in health care spending came primarily as the result of higher prices rather than because people used more care. “Faster growth in medical prices more than offset slower growth in the use and intensity of health care goods and services,” the report says. Medical price inflation rose 2.1%, up from 1.3% in 2017.

The overall rise in health care spending was driven primarily by faster growth in private insurance and Medicare spending. The non-medical cost of health insurance jumped 13%, up from 4.3% in 2017, largely as the result of the reinstatement of an Obamacare tax on health insurers that was suspended for one year in 2017.

“Except for the slight uptick that was driven primarily by the one-time impact of the reinstated health insurance tax, growth in 2018 was relatively stable,” researchers from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) write in the report.

The overall growth in health spending was, however, slower than the 5.4% nominal growth rate of the economy. As a result, the share of gross domestic product devoted to health care spending edged down to 17.7% from 17.9% in 2017.

Here are some more key details from the analysis:

  • Spending keeps climbing: The $11,172 in per capita health spending was up $430 from 2017 — and up more than $2,000 compared to five years earlier. Overall, the U.S. spends nearly $800 billion a year more on health care than it did just five years ago.
  • Private health insurance spending spikes: The reinstatement of the Obamacare tax on health insurers contributed to a 15.3% increase in the net cost of private health insurance, following a 9.5% increase the year before. The number of people with private plans dipped, but spending per enrollee was up 6.7% — the fastest increase since 2004 — to about $6,200.
  • Households are getting hit: Out-of-pocket costs grew by 2.8%, faster than the 2.2% rise in 2017. And contributions to premiums for employer-provided plans grew by 3.4%, down from 6.8% the year before.
  • A drop in drug prices: Retail prescription drug prices fell by 1%, the first decline since 1973, as consumer use of generic drugs increased slightly. But total spending on prescription drugs rose 2.5% to $335 billion.
  • Federal health care spending up 5.6%: Overall federal spending on health care grew at twice the 2.8% rate from 2017. Medicare spending rose 6.4%, topping $750 billion. Per enrollee Medicare expenditures grew 3.7%, up from 1.6% in 2017. Spending in private Medicare Advantage plans increased by almost 12%, up from about 10% in 2017. Medicaid spending, at just under $600 billion, was up 3%.

The Healthiest — and Unhealthiest — States

Vermont is the healthiest state in the U.S., according to the latest annual ranking by the United Health Foundation. Vermont climbed three spots, thanks in part to “a low incidence of chlamydia, a low violent crime rate and a low percentage of uninsured individuals,” the report says. The rest of the top five are Massachusetts, Hawaii, Connecticut and Utah.

At the other end of the list, Mississippi ranks as the least healthy state — or, as the report euphemistically suggests, the state with the greatest opportunity for improvement. Louisiana, Arkansas, Alabama and Oklahoma round out the bottom five. New York has made the most progress since the annual report was first published in 1990, climbing from 40 to 11.

Classic Blue is the Color of the Year for 2020, Pantone says: “It’s a reassuring blue, full of calm and confidence. It builds connection.” Uh huh. And they swear it's not political

Send your tips and feedback to And please tell your friends they can sign up here for their own copy of this newsletter.


Views and Analysis