Growth in US Healthcare Spending Slowed in 2016: CMS

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"Over the last decade, the U.S. has experienced unique events that have affected the health care sector, including the most severe economic recession since the Great Depression, major changes to the health care system because of the ACA and historic lows in medical price inflation", said Micah Hartman, a statistician in the Office of the Actuary at CMS and lead author of a Health Affairs article on the results.

"Total nominal USA health care spending increased 4.3 percent and reached $3.3 trillion in 2016", the researchers reported"-with that $3.3 trillion (actually $3.337 trillion) surpassing the $3.2 trillion total in 2015 and $3.026 trillion in 2014". Medicaid and private health insurance spending growth slowed, mainly as the result of ACA enrollments in 2014 and 2015. The ACA requires most Americans to carry medical insurance - a mandate that would be repealed by the Senate tax overhaul plan.

The rate of healthcare spending in the United States slowed down past year to levels previously seen between 2008-2015, driven by much slower growth in spending for retail prescription drugs, as well as hospital care and physician and clinical services.

Medicare spending grew 3.6 percent to $672.1 billion in 2016, which was slower growth than the previous two years when spending grew 4.8 percent in 2015 and 4.9 percent in 2014. "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.

Hospital spending - which makes up the highest share of health expenditures - increased by 4.7 percent previous year, a full percentage point lower than in 2015, the report said. Increased utilization from enrollment expansion and the increasing prevalence of high deductible health plans are likely to have contributed to the trend: 29% of covered workers in 2016 had a high-deductible plan, and average private health insurance deductibles rose 12%.

Fewer drugs were introduced in 2016 and there was a slower growth in prices for both brand-name and generic drugs.

Still, health spending continues to outpace overall spending on goods and services, which increased 2.8 percent in 2016. The report estimates that in 2016, healthcare spending grew at a rate of 4.3% to $3.3 trillion, or $10,348 per person.

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Retail prescription drug spending slowed in 2016, increasing 1.3 percent to $328.6 billion.

Physician and clinical services spending rose by 5.4 percent, slowing from a growth rate of 5.9 percent in 2015. Hospital care expenditure growth slowed from 5.7% in 2015 to 4.7% in 2016.

The slower growth in 2016 may indicate a return to a more normal trend with future factors based on economic conditions and shifting demographics, the authors write. The primary reason for the deceleration in federal spending growth in 2016 was federal Medicaid spending, which grew more slowly in 2016 as a result of less Medicaid enrollment growth.

Total physician and clinical services expenditures reaching $664.9 billion, or 20 percent of overall healthcare spending in 2016. Medicaid goods and services-with the exception of nursing care facilities and continuing care retirement communities-experienced decelerating growth in 2016.

The share of the economy devoted to healthcare increased from 17.7 percent in 2015 to 17.9 percent in 2016. Private health insurance continued to be the largest payer for health care goods and services in the U.S. in 2016-accounting for just over one-third of total healthcare spending.

Changes in the age and gender mix of the population accounted for 0.6 percent of the growth. "When you add people to the rolls of Medicaid and private health insurance they are going to be using all types of medical goods and services".

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.

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