National Home Health Spending Hits Record $102.2 Billion — With Room for Growth

National home health spending soared to new heights in 2018, a fact that strongly reflects the ongoing shift toward home- and community-based care and away from hospitals, skilled nursing facilities (SNFs) and other institutional settings.

Overall, U.S. home health spending officially hit $102.2 billion in 2018, according to a new analysis from the Centers for Medicare & Medicaid Services (CMS) Office of the Actuary published Thursday in the journal Health Affairs.

That total is a more than 30% increase compared to all home health spending just five years ago.

Several factors have played into the rise of home health care this decade.

From a demographics perspective, the U.S. population is aging at a startling rate, with more than 10,000 baby boomers turning 65 each day. At the same time, that population of older adults is largely sicker and more clinically complex than in the past.

Meanwhile, from a health care economics perspective, home health services have been repeatedly proven to improve patient outcomes and keep the total cost of care down compared to other settings. Recognizing that value, payers, health systems and physicians have steadily ramped up their individual efforts to partner with in-home care providers — both to avoid costly re-hospitalizations but also to prevent expensive acute episodes entirely.

“We think of home health now as a post-acute service. We’re stuck under that label,” LHC Group Inc. (Nasdaq: LHCG) CEO and Chairman Keith Myers previously told Home Health Care News. “But there’s a huge pre-acute opportunity for home health. When patients begin to decline, physicians can often see that occurring, see the trend line. I believe home health, more and more, will intervene on a pre-acute basis and avoid the hospitalization in the first place.”

While home health care has had plenty of tailwinds working in its favor, it still accounted for a relatively small portion — or not quite 3% — of total U.S. health care expenditures in 2018, the CMS analysis reveals.

Total U.S. health care spending was about $3.65 trillion last year.

Combined health care spending increased 4.6% in 2018, faster than in 2017, but more slowly than the overall economy, according to the CMS data. The share of the economy devoted to health care spending, as measured by the gross domestic product, declined from 17.9% in 2017 to 17.7% last year.

“Health care spending growth picked up across all major payers in 2018 as medical prices grew faster, due in part to the reinstatement of the health insurance tax on all health insurance providers,” Micah Hartman, a statistician in the CMS Office of the Actuary and first author of the Health Affairs article, noted. “However, economic growth outpaced health care spending and the share of the economy devoted to health care fell.”

In comparison, home health care spending growth specifically checked in at 5.2% in 2018. It reached 4.5% and 4.2% in the two prior years, respectively.

In addition to the previously highlighted drivers, home health care is also propelled on the federal level by staunch advocates in Congress, a point National Association for Home Care & Hospice (NAHC) President William A. Dombi echoed in October. With that in mind, it wouldn’t be surprising to see even higher growth rates moving forward, despite the upcoming Patient-Driven Groupings Model (PDGM) looming.

“Virtually every member of Congress and every person at CMS … knows what you do because they’ve had a personal experience [with home health care],” Dombi said at NAHC’s annual conference. “In Washington circles, everyone is envious of that kind of relationship.”

Medicare spending reached $750.2 billion in 2018, accounting for 21% of total health care expenditures. Total Medicare spending increased by 6.4%, following slower growth of 4.2% in 2017.

At 3%, Medicaid expenditures grew at a comparatively slower pace in 2018, totaling $597.4 billion and accounting for 16% of total national health expenditures.

Hospital spending hit $1.2 trillion in 2018, accounting for roughly one-third of all health care spending. Broadly, those statistics should encourage health care stakeholders to keep working at lowering re-hospitalization rates with home health services for years to come.

U.S. expenditures on home health care are projected to hit $186.8 billion by 2027.