The Issue

As growth in Medicare spending has slowed over the past decade, private insurance premiums have risen dramatically, and overall U.S. health care spending has increased approximately 8 percent each year. While a lot is known about spending patterns in fee-for-service Medicare across regional markets, similar data are lacking for private health plan enrollees. Having this information would help researchers understand, for example, whether there is a correlation between spending patterns for traditional Medicare beneficiaries and commercial health plan members, and whether spending growth varies across geographic regions. In a new study in Health Affairs, Commonwealth Fund–supported researchers examined patterns in health spending from 2007 to 2014 for people enrolled in private employer-sponsored insurance plans and compared these to Medicare spending patterns.

16.9% growth in per-member health care spending in employer-sponsored insurance plans, 2007–2014

What the Study Found

  • Between 2007 and 2014, per-member health spending in employer-sponsored health insurance grew 16.9 percent.
  • Over the same period, per-member growth in traditional Medicare spending fell 1.2 percent.
  • In health care markets with the lowest spending growth, spending on commercially insured members grew 0.22 percent annually.
  • In health care markets with the highest spending growth, spending on commercially insured members rose 3.45 percent annually.

1.2% decrease in Medicare spending per beneficiary, 2007–2014

The Big Picture

Health care spending growth rates for privately insured people varied substantially across regional health care markets between 2007 and 2014. But within the same regions of the country, there was little correlation between cost growth for privately insured people and that for fee-for-service Medicare beneficiaries. These cost variations may be related to the ability of health care providers to negotiate prices with commercial insurers — something providers cannot do under Medicare’s regulated fee-for-service payment system.

The Bottom Line

While growth in health spending on people in employer-sponsored health plans varies widely across health care markets, there is less variation in spending on fee-for-service Medicare beneficiaries.