Health Finance Issues



Doctor with Patient Photo

Health finance includes the mobilization of funds for health care, the allocation of funds to specific regions and population groups and for specific types of health care, and/or mechanisms for paying for health care. Rising health care costs continue to dominate the American health policy agenda. Accordingly, there are thousands of publications, hundreds of professional, industry and advocacy organizations, and dozens of well-funded "think tanks" writing about health finances. In the face of this activity, the National Conference of State Legislatures (NCSL) has concentrated its own resources on questions frequently asked by state legislators.

2018 & 2017 Health Finance Updates 

 Interpreting National Health Expenditure Projections: Issues and Challenges  

Health Affairs, in mid-February 2018, published (as an abstract) the projections for health spending over the next decade from the CMS Office of the Actuary. The top line estimate is that health spending will grow at 5.5 percent per year through 2026. This rate is about halfway between the pre-recession rate of 7.3 percent and the exceptionally low rate (3.8 percent) experienced during the recession and immediate aftermath. This projected spending growth is 1% above expected gross domestic product (GDP) growth, a smaller gap than for almost any 10-year period since 1990. These non-partisan, thorough projections are a valuable benchmark for all stakeholders anticipating the fiscal footprint of the health care system on the economy, but there are several important issues to keep in mind.
> Read full analysis By Michael E. Chernew (2/14/2018)

HHS/CMS Releases 2016 National Health Expenditures.
On Dec. 7, 2017, latest figures on health spending showed that in 2016, overall national health spending increased 4.3 percent following 5.8 percent growth in 2015, according to a study by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS).  Following Affordable Care Act (ACA) coverage expansion and significant retail prescription drug spending growth in 2014 and 2015, health care spending growth decelerated in 2016. The report concludes that the 2016 expenditure slowdown was broadly based as growth for all major payers (private health insurance, Medicare, and Medicaid) and goods and service categories (hospitals, physician and clinical services, and retail prescription drugs) slowed in 2016. 
     Total nominal US health care spending reached $3.3 trillion in 2016. Per capita spending on health care increased by $354, reaching $10,348. The share of gross domestic product devoted to health care spending was 17.9 percent in 2016, up from 17.7 percent in 2015.
Read or download the HHS Summary  (3 pages, PDF) published 12/7/2017.

2017 Federal Poverty Guidelines -  2017 Table below, effective 1/31/2017Milliman Medical spending - May 2017

2017 Milliman Medical Index. In 2017, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $26,944 (see Figure 1), according to the Milliman Medical Index (MMI). 1Download the report, 12 pp., PDF » By Milliman, 16 May 2017.  Graph >
    • Rate of increase is 4.3%. This is the lowest rate since they began tracking the MMI in 2001.Of the $26,944 spent by a family of four, $11,685 is paid by the employee, through a combination of $7,151 in payroll deductions for premium, and $4,534 in out-of-pocket costs incurred at time of care. 
    • Prescription drug trends are lower, but still high. For the first time since 2013 and 2014, the family of four’s prescription drug trends have decreased in two consecutive years. Still, the 2017 prescription drug cost increase of 8% is more than double the medical increase of 3.6%.

Medicaid as a Share of States’ Total Budgets and State-Funded BudgetsCombined federal and state expenditures for Medicaid accounted for about 16 percent of U.S. health care spending in calendar year 2014, the most recent year for which historical data are available. Published by MACPAC, 2016

CMS actuary predicts GOP repeal bill will reduce coverage by 13 million.  The CMS Office of the Actuary estimated that the House-passed American Health Care Act would reduce insurance coverage by 13 million people by 2026. In contrast the Congressional Budget Office's prediction in April was 23 million.  The CMS actuary said the AHCA would reduce federal spending by $328 billion over 10 years, mainly due to lower Medicaid expenditures. The CBO projected that the bill would reduce federal deficits by $119 billion. The Office of the Actuary said it's possible that such waivers "could result in a deteriorating or possibly failing market depending on how a state chose to implement the waiver." Published excerpt with Modern Healthcare, June 13, 2017

Repealing Federal Health Reform: Economic and Employment Consequences for States, full report; The Commonwealth Fund, January 2017. 

"Graham-Cassidy Bill Would Reduce Federal Funding to States by $215 Billion"- Avalere Health [Full summary download 10pp-PDF- Sept. 20, 2017. *NEW*

NCSL State Budget Update - Spring 2017 - full report (18 pages, PDF) -This includes at least a dozen references to Medicaid and health spending. Posted 6/1/2017 

National Health Expenditure Projections, 2016–25: Price Increases, Aging Push Sector To 20 Percent Of Economy
Estimates released February 25, 2017 from the Office of the Actuary at CMS project an average rate of national health spending growth of 5.6 percent for 2016–25. A new study examines that growth in national health spending is expected to be driven by projected increases in medical prices from a recent historic low of 0.8 percent in 2015, to nearly 3.0 percent by 2025. Growth in the use and intensity of medical services, however, is projected to slow relative to that experienced in 2014 and 2105, as the impacts of the Affordable Care Act’s coverage expansion wane and enrollment growth in Medicaid and private insurance slows. [full text may require password]

Home healthcare spending outpaces hospital growth in 2017.  The overall monthly national healthcare spending rate modestly increased 4.3% from August 2016 to August 2017, with a notable increase in home health spending, according to a brief from Altarum’s Center for Sustainable Health Spending. Download the brief, 4 pages, PDF, October 2017.

Faster Growth For US National Health Spending In 2015 
A new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) estimates that in 2015 health care spending in the United States grew at a rate of 5.8 percent and reached $3.2 trillion, or $9,990 per person. In 2014 spending increased 5.3 percent, which followed five consecutive years of historically low growth from 2009 to 2013. Faster growth in 2014 and 2015 occurred as Affordable Care Act (ACA) provisions expanded coverage for individuals through Marketplace plans and the Medicaid program. published in Health Affairs, 12/28/2016. By CMS staff: Anne B Martin, Micah Hartman, Benjamin Washington, Aaron Catlin, The National Health Expenditure Accounts Team.

NCSL MEETING SESSIONS: Targeting Health Care Costs - an NCSL “Deep Dive” Session: Aug. 10, 2016.
You know that health costs continue to rise, challenging state budget writers and squeezing other program priorities. But, how much do you know about where the money goes? For example, about 5 percent of the nation’s patients account for half of health care spending.  What was learned: Where health care spending goes. State strategies to allocate health money more efficiently and effectively while improving patients’ health. Ways to reduce inefficiencies and waste in the health system Session slides and resources for two cost sessions.

National Health Expenditures (NHE), released July 2016. Estimates released on July 13, 2016 from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) project an average rate of national health spending growth of 5.8 percent for 2015–25, exceeding the expected average growth in gross domestic product (GDP) by 1.3 percentage points per year. As a result, the health share of the economy is projected to be 20.1 percent at the end of this period, up from 17.5 percent in 2014. The study also finds that the percentage of the US population that is uninsured is expected to be 8 percent in 2025, down from about 11 percent in 2014.  View extended Table below.
Key Findings: Comparing health status and use of medical services among these three groups, the study finds that:

  • Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who had BCBS individual coverage prior to health-care reform.
  • Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical care, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health insurance.
  • The new enrollees used more medical services across all sites of care—including inpatient admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.
  • Medical costs of care for the new individual market members were, on average, 19 percent higher than employer-based group members in 2014 and 22 percent higher in 2015. For example, the average monthly medical spending per member was $559 for individual enrollees versus $457 for group members in 2015.
    >> Download Full Report >>  View The Press Release >>

"Medicare for All": The cosmically huge 'if'.
Imagine a world in which the rosy assumptions Sen. Bernie Sanders (I-Vt.) makes on behalf of his “Medicare for all” health-care plan turn out to be true." George Mason University’s "libertarian-leaning Mercatus Center, did in a paper." The author found that the government would expand massively — by $32.6 trillion over 10 years, "up an additional 12.7 percent of gross domestic product by 2031." (Report, 24 pp PDF  and Washington Post) August 2018.


The 2017 poverty guidelines are in effect as of January 26, 2017. 
See also the Federal Register notice of the 2017 poverty guidelines, published January 31, 2017

















Alaska - 1 person = $15,060 Hawaii - 1 person = $13,860  

Employer-Sponsored Family Health Premiums Rise 4 Percent In 2015

Single and family premiums for employer-sponsored health insurance rose an average of 4 percent this year, continuing a decade-long period of moderate growth, according to the Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2015 Employer Health Benefits Survey released Sept. 22, 2015. 

  • Premiums: The average annual premium for single coverage is $6,251, of which workers on average pay $1,071. The average family premium is now $17,545, with workers on average contributing $4,955.  Since 2005, premiums have grown an average of 5 percent each year, compared to 11 percent annually between 1999 and 2005
  • Deductibles: Since 2010, Deductibles for All Workers Have Risen Almost Three Times as Fast as Premiums and About Seven Times as Fast as Wages and Inflation. For 2015, 81 percent of covered workers are in plans with a general annual deductible, which average $1,318 for single coverage.
    • Covered workers at large firms (at least 200 workers) face a $1,105 average deductible. Covered workers in smaller firms (three to 199 workers) face an average deductible of $1,836 in 2015. (66% more than the large firm employees. 

 Summary, also graphics and full report: [8 pages, PDF]
     > Select findings published in a Health Affairs Web First. [Read full article Published 9/22/2015

U.S. Spending At-a-Glance:

2014: Health spending in the U.S. grew 5.3 percent in 2014, reaching $3.0 trillion or $9,523 per person.  As a share of the nation's Gross Domestic Product, health spending accounted for 17.5 percent.  The annual study by the Office of the Actuary at the CMS (Centers for Medicare & Medicaid Services) published Dec. 2, 2015 as a Web First by Health Affairs.  The following are some highlighted specifics:

  • Overall, health care spending grew 1.2 percentage points faster than the overall economy in 2014, resulting in a 0.2 percentage-point increase in the health spending share of gross domestic product – from 17.3 percent to 17.5 percent. In the decade prior to the Affordable Care Act (2000-2009), health care spending grew by an average of 6.9 percent annually, 2.8 percentage points faster than GDP. 

  • Medicaid spending accounted for 16 percent of total spending on health and grew 11.0 percent in 2014 to $495.8 billion, a faster increase than the 5.9 percent growth in 2013. Medicaid growth in 2014 was driven by coverage expansion under the Affordable Care Act, as 26 states plus the District of Columbia provided coverage for individuals with incomes of up to 138 percent of the federal poverty level. An estimated 6.3 million newly eligible enrollees were added to Medicaid in 2014. Per-enrollee spending decreased by 2.0 percent.
  • Retail prescription drug spending accelerated in 2014, growing 12.2 percent to $297.7 billion, compared to 2.4 percent growth in 2013. Rapid growth in 2014 was due to increased spending for new medicines (particularly for specialty drugs such as those used to treat hepatitis C), a smaller impact from patent expirations, and price increases for brand-name drugs. Private health insurance, Medicare, and Medicaid spending growth for prescription drugs all accelerated in 2014. 
  • 2013 Spending: In 2013, total national health expenditures in the United States reached $2.9 trillion, or $9,255 per person. The annual OACT report update (released Dec. 3, 2014) showed health spending continued a pattern of low growth—between 3.6 percent and 4.1 percent for five consecutive years.
  • "Why the Geographic Variation in Health Care Spending Can’t Tell Us Much about the Efficiency or Quality of our Health Care System" - a Sept. 2014 report by the Brookings Institution, argues that a one-size-fits-all health-care approach won’t cut medical spending. [55 pp,PDF]   
  • Calculating Disease-Based Medical Care Expenditure Indexes for Medicare Beneficiaries: A Comparison of Method and Data Choices. Published by the U.S. Bureau of Economic Affairs, Oct. 2014                           

Medicaid Expenditures and Enrollment continue to be a dominant state concern and commitment.

The 2013 Milliman Medical Index of total health spending for a typical family of four covered by an employment-based preferred-provider health insurance policy, including the total insurance premium and the family’s out-of-pocket spending, now stands at $22,030. The total share of this cost borne directly by the family—$9,144 in payroll deductions and out-of-pocket costs—now exceeds the cost of groceries for the MMI’s typical family of four. The out-of-pocket cost alone is $3,600 for co-pays, coinsurance, and other cost sharing. Full Text: MMI 2013.

National health expenditures (NHE) -released July 2016 (exhibit 1)

Amounts and annual growth from previous year shown, by spending category, selected calendar years 2007–25

Spending category






National health expenditures






Health consumption expenditures






  Personal health care






   Hospital care






   Professional services






    Physician and clinical services






    Other professional services






    Dental services






   Other health, residential, and personal care






   Long-term care services






    Home health care






    Nursing care facilities and continuing care retirement communities






   Retail outlet sales of medical products






    Prescription drugs






    Durable medical equipment






    Other nondurable medical products






  Government administration






  Net cost of health insurance






  Government public health activities












  Noncommercial research






  Structures and equipment






NHE (annual % change)






Health Reform Grants and Loans

The federal Affordable Care Act (ACA) provides for federal grants as well as loans to implement specific programs and sections of the health reform law.  The follow five 50-state tables list dollar amounts, by state and by program.  The information is derived from HHS posted information; also see the TAGGS link below for all health funds, in addition to ACA-specific funds.

HHS finalizes rule guaranteeing 100 percent funding for new Medicaid beneficiaries

On March 29, 2013, Health and Human Services (HHS) announced a final rule that states, effective January 1, 2014, the federal government will pay 100 percent of the cost of certain newly eligible adult Medicaid beneficiaries.  These payments will be in effect  through 2016, phasing down to a permanent 90 percent matching rate by 2020. The Affordable Care Act authorizes states to expand Medicaid to adult Americans under age 65 with income of up to 133 percent of the federal poverty level (approximately $15,000 for a single adult in 2012) and provides "unprecedented federal funding for these states."  Read the HHS fact rules, released 3/29/2013.

NCSL Published Resources

NCSL Meeting Presentations - Part 2 - ARCHIVES

  • 2013: Taming Health Care Costs: New Solutions, New Challenges  – held at NCSL Legislative Summit in Atlanta, August 14, 2013. America spends, on average, nearly $9,000 per person on health care each year. The cost to the nation is $2.8 trillion—almost 18 percent of total GDP. How can we keep people healthy and budgets affordable, while improving care and coverage as well as combating waste and abuse? Learn about the latest payment reforms and coverage plans and how to balance the benefits of future advances with our ability to pay for them.
  • Presentation by speaker Susan Dentzer, former editor-in-chief of Health Affairs; senior policy advisor at Robert Wood Johnson Foundation
  • Presentation | Comments by Representative James A. Dunnigan of Utah
  • Presentation by Jim Riesberg, former Insurance Commissioner of Colorado
  • Handout by Speaker Richard Cauchi: Health Cost Containment and Efficiencies
  • Handout by speaker Ray Scheppach, project director of the State Health Care Cost Containment Commission.
  • Sen. Richard T. Moore of Massachusetts.

Can We Afford Our Healthcare? New Directions and Solutions- NCSL Legislative Summit, Sponsored by the NCSL Health Committee, 7/24/10 
America spends an astounding $2.4 trillion to keep us alive, productive and healthy, a number that will rise by $175 billion this year. Some states want to take the lead in "fixing" key parts this system—a daunting task for big- and small-government experts alike. Hear three national experts discuss recent initiatives intended to control costs while preserving or improving health outcomes.
Jeanne Lambrew, Associate Professor of Public Affairs, LBJ School, University of Texas; former Assistant Director for Health, OMB, White House- Presentation
Robert B. Helms, Resident Scholar & Director of Health Policy Studies, American Enterprise Institute; former Assistant Secretary,
HHS, Washington, D.C.- Presentation
John Clymer, President, Partnership for Prevention, Washington, DC- Presentation

Additional, Non-NCSL Online Resources & Reports of Interest - Includes Archives

The following is a select list of more recent or state-oriented reports from government, policy, media and academic sources.

  • The Numbers Don’t Lie: Advancing Health Equity in Oregon through Better Data Collection. Community Catalyst, Feb. 6, 2014. Discusses the efforts of the Data Equity Legislative Coalition to support legislation to establish the collection of health care data using uniform standards.
  • Patients' Costs Skyrocket; Specialists' Incomes Soar, by Elisabeth Rosenthal for the New York Times. 19 Jan. 2014.
  • Medicaid Expenditures for Long Term Services and Supports in 2011, released fall 2013, is summarized in Dennis Smith's MLA report post of 12/23/2013. It shows "one bright spot is that spending on long term services and supports is growing more slowly than the rest of the Medicaid program, as states continue to shift care from institutional settings to home and community based services and supports."  The smallest annual increase in Medicaid spending on LTSS, just 0.8%, between 2010 and 2011. Also see CMS calculations online.
  • State Differences in Costs of Employer-Sponsored Coverage: An AHRQ/MEPS Statistical Brief A brief from the Agency for Healthcare Research and Quality (AHRQ) examines state differences in the cost of employer-sponsored health insurance in 2012, based on the most recent data available from the Insurance Component of the Medical Expenditure Panel Survey (MEPS-IC), an annual federal survey of US private and public sector employers throughout the country.  The brief considers the average premiums and employee contributions for private-sector establishments in 2012 in the 10 most populous states based on the 2010 Decennial Census.  Of these states, New York had the highest average annual health insurance premiums for single coverage ($6,033), employee-plus-one coverage ($11,956), and family coverage ($16,924); at the same time, the average annual employee premium contribution in New York as a percentage of the premium price was below the national average for employee-plus-one coverage (22.3% vs. 26.6%) and family coverage (25.3% vs. 27.4%).  Published August 2013.
  • Assessing the Effects of the Economy on the Recent Slowdown in Health Spending Health spending has been growing at historically low levels in recent years. The Office of the Actuary (OACT) in the Centers for Medicare and Medicaid Services reports that national health spending grew by 3.9% each year from 2009 to 2011, the lowest rate of growth since the federal government began keeping such statistics in 1960. Estimates from the Center for Sustainable Health Spending at the Altarum Institute suggest that the slowdown largely continued into 2012, with health spending growing by 4.3% last year. The Kaiser Family Foundation/Health Research & Educational Trust Employer Health Benefits Survey shows similar moderation with premiums in employer-sponsored health plans increasing by 4% in 2012. [Full Report, HTML] Kaiser Family Foundation, April 2013
  • Health Care Costs and Spending in Massachusetts: A Review of the Evidence

This comprehensive chart pack pulls together, in one easy-to-use resource, many of the major findings and analyses from recent state and national research efforts including reports by the Massachusetts Division of Health Care Finance and Policy, the Massachusetts Attorney General’s Office, as well as analyses by the Centers for Medicare and Medicaid Services and the Dartmouth Atlas of Health Care. The chart pack features data and complete references on topics such as Massachusetts health care spending trends, cost drivers, variations in pricing as well as key differences between Massachusetts and the U.S.-  March 2012.

Health Care Costs and Spending in Massachusetts: A Review of the Evidence as a PDF file
> Health Care Costs and Spending in Massachusetts: A Review of the Evidence as a PowerPoint file

  • Medical Expenditure Panel Survey (MEPS) - comprehensive health data by state, 2011 and earlier,
    • Insurance Component  collects data from private and public sector employers on the health insurance plans offered to employees.
    • Publications: Analyses of MEPS data ranging from brief to extensive reports, chart books consisting mainly of graphs, and descriptions
    • Conduct your own state data search - 50-state tables on costs, premiums, enrollment, most for 2011 and back to 1999. State Search
    • Private-sector establishments that offer health insurance by firm size and % by State: 2011-  PDF |  HTML
    • Private-sector establishments that offer health insurance by plan provider arrangement, %  by State: 2011 PDF (6.6 KB) HTML
  • “The American Way of Birth is the Costliest in the World,”  In the New York Times Elisabeth Rosenthal discusses the comparatively high costs of childbirth in America. “Childbirth in the United States is uniquely expensive, and maternity and newborn care constitute the single biggest category of hospital payouts for most commercial insurers and state Medicaid programs. The cumulative costs of approximately four million annual births is well over $50 billion.” Published on June 30, 2013.
  • Non-Profit Hospitals and Community Benefits
    • What Are Hospital Community Benefits? -  A Fact Sheet gives a brief overview of hospital community benefits and considerations for state and local decision-makers.
    • Community Benefit State Law Profiles, a compilation of each state’s community benefit laws and regulations analyzed in the context of the Affordable Care Act’s (ACA’s) community benefit framework. An interactive map links to each state’s Profile and a summary table compares community benefit laws from state to state.
    • Hospital Community Benefits after the ACA: The State Law Landscape - An issue brief presents the Profiles’ findings and begins the analysis to facilitate a better understanding of each state’s community benefit landscape and its significance in the context of national health reform.[16 pp, PDF]
  • The Hilltop Institute’s Hospital Community Benefit Program, is a central resource for policymakers who seek to ensure that tax-exempt hospital community benefit activities are responsive to community health needs. The Institute has released a number of new resources. [links added April 2013]
  • Health Care and Profits Make for a Poor Mix, Jan. 9, 2013 |  "The relevant question is how best we can serve our social needs at the lowest possible cost...improving the delivery of social services like health care and pensions may be possible without increasing the burden on American families, simply by removing the profit motive from the equation," reports Eduardo Porter of the New York Times..
  • Graphic from "Assessing the Effects of the Economy on the Recent Slowdown in Health Spending" Report April 2013

Excess health spending re inflation
Information compiled by Richard Cauchi, NCSL Health Program, Denver.

NOTE: NCSL provides links to other Web sites for informational purposes only. Providing these links does not indicate NCSL's support or endorsement of the site.