Spending per child growing faster than all other age groups

In general, when we talk about the high cost of health care, we’re rarely talking about children. Back when Congress was debating whether it would renew SCHIP in 2007, the CBO estimated that covering an additional 1 million children for 5 years would cost  $6 billion in Medicaid or $4 billion in SCHIP. Compared to what private insurance or Medicare costs, that’s a shockingly low amount.

That said, the findings of a recent report from the Health Care Cost Institute will cause some, including me, to pause. From the Children’s Health Care Spending Report: 2007-2010:

The Children's Health Care Spending Report: 2007—2010 is the first report of its kind to track changes in expenditure and utilization of health care services by beneficiaries age 18 and younger ("children") covered by employer-sponsored, private health insurance (ESI). The report does not include information about uninsured children, children covered by individual health insurance, or children insured through a public program. As a result, the levels and changes in spending, prices, utilization, and service mix are generalizable only for children covered under ESI.

What did they find? The first thing to note is that – yes – kids are rather cheap to cover. On average, health care spending was $2,123 per child, which is far less than the overall $8,600 we’re spending on average for all Americans. But that’s where the good news ends. It turns out that spending per child rose 4.5 percent from 2009-2010. That’s faster than any other age group with employer sponsored insurance.

Look at the chart below. All childhood age groups, even babies, had spending grow faster in the past few years than 55-64 year olds, who traditionally cost the most. With the exception of 0-3 year olds, all children’s age groups saw spending per person rise faster than any adult age groups at all.

This is a disturbing trend. While children are still cheap, on average, if their spending rises quickly, then they could begin to be more of a driver of health care spending in general. Moreover, since kids constitute such a large percentage of Medicaid enrollees, should these increases be indicative of all health care spending on children, then this bodes poorly for states that are already struggling to cover Medicaid costs. Should children become significant drivers of state spending on health care, then Medicaid budgets are in real trouble.

Spending on children grew throughout the United Stated, but significant differences exist based on region. Spending in the West was only $1,969 compared to $2,280 in the Northeast. That means that care in the Northeast averages about 16 percent more than care in the West.

As we’ve seen from other reports, it seems to be prices that are driving increased spending. From 2007 to 2010, both inpatient admissions and outpatient visits declined. Other types of visits did increase, and utilization for pharmaceuticals was mixed (generics up and brand name drugs down), but that wasn’t the reason that spending went up. The growth of prices for care outpaced any changes in utilization.

Health care spending is a real problem in the United States for any number of reasons. We have typically focused on the elderly for spending reductions, as they constitute a significant portion of both Medicare and Medicaid spending. We shouldn’t stop doing that. At the same time, though, we can’t ignore the fact that children’s health care spending is increasing, too, and at rates that surpass those of adults. We need to get a handle on that, too.