U.S. health spending growth slows, but still rises to 17.9% of GDP

U.S. health spending growth slows, but still rises to 17.9% of GDP

Health spending increased 4.3 percent to $3.3 trillion compared to a 5.8 percent growth rate in 2015, according to a report by the Centers for Medicare and Medicaid Services (CMS), which administers the government's health programs.

Major payersPrivate health insurance rose 5.1% to $1.1 trillion, slower than 6.9% growth in 2015. "In 2016, the slowdown in health care spending followed significant insurance coverage expansions under the ACA and very strong growth in retail prescription drug spending in 2014 and 2015".

The slowdown in health spending growth was seen broadly across all major forms of private and public insurance, and in medical services, prescription drugs and other goods, according to an official analysis released Wednesday. And they told reporters they could not recall another time before a year ago that spending growth had slowed for all three major payers - private health insurance, Medicare and Medicaid - and for goods and services, too.

Medicaid spending growth was 3.9 percent in 2016, increasing to $565.5 billion. During these years, health care spending increased at the lowest rates in the history of the National Health Expenditure Accounts, but low economic growth led to an increase of 2.0 percentage points in the share of the economy devoted to health care, from 15.9 percent in 2007 to 17.9 percent in 2016. "Following that period, 2014 and 2015 saw dramatic increases in health insurance enrollment, as major provisions of the ACA expanded insurance options under private health insurance Marketplaces and the Medicaid program-factors contributing to 8.7 million people gaining private health insurance and 10.2 million gaining Medicaid coverage in 2014 and 2015", they noted. CMS attributed the previous large increases to the introduction of new drugs and higher prices for existing drugs, particularly those used to help treat hepatitis C.

On a per capita basis, national health spending grew at 3.5 percent, reaching $10,348 in 2016.

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The study will also appear in the January 2018 issue of Health Affairs and is part of an ongoing series on health spending in the Health Affairs blog. Changes in the age and gender mix of the population accounted for a 0.6 percentage point of the growth in per capita health spending. That's down from 5.8% in 2015 and 5.1% in 2014.

Spending growth of 8.2 percent for clinical services outpaced the 4.6 percent growth in spending for physician services for the 12th consecutive year, the report said. Despite the slower growth in 2016, healthcare spending still increased faster than the GDP growth rate. Overall use and intensity of services was 2.3%, lower than the increase of 3.4% in 2015, due to the effects of the ACA. It also noted a decline in spending for hepatitis C drugs. The pace of home health spending slowed compared to recent years, though total spending in home health ticked up. Growth in non-price factors such as the use and intensity of services increased 3.8% and accounted for most of the increase in spending in 2016, though at a slower rate than the 4.5% increase in 2015. That was due to slower enrollment growth, which was partly offset by faster growth in hospital prices, which accelerated slightly from 0.9% in 2015 to 1.2% in 2016.

On a per enrollee basis, Medicaid spending increased 0.9 percent compared to 4.5 percent in 2015, which reflects increased efforts by states to control costs, a decline in supplemental payments to hospitals, and a decrease in per enrollee costs for newly eligible adults.

Medicare spending hit $672.1 billion, accounting for 20% of total healthcare expenditures. "As a result, health care spending increased 5.1 percent in 2014 and 5.8 percent in 2015". During the years of the initial impacts of the ACA expansion, Medicaid spending rose 9.5% last year and 11.5% in 2014 as individuals gained coverage.

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