National health spending slowed for 2nd straight year, at $3.5T
- National health spending slowed to a growth rate of 3.9% in 2017 to $3.5 trillion or $10,739 per person, according to an annual analysis the CMS Office of the Actuary released Thursday. It marks the second consecutive year spending growth slowed, following a 4.8% growth rate in 2016 and 5.8% in 2015.
- Driving the slowdown was fewer people getting care. Hospital care saw a 1% growth rate drop, physician and clinical services a 1.4% drop and retail prescriptions slipped 1.9% decrease. Medical price growth, however, accelerated to 1.6% in 2017 compared to 1.3% in 2016.
- Nearly all payers saw deceleration of spending growth, excluding the departments of Defense and Veterans Affairs and the Children's Health Insurance Program. Spending growth dropped to 4.2% for private insurers (2% decrease), 4.2% for Medicare (0.1% decrease), 2.9% for Medicaid (1.3% decrease) and 3.5% for out-of-pocket payers (1.8% decrease).
The government projected 4.6% national health spending growth early in the year. Officials told reporters that decelerations in growth for private insurance, Medicare and retail drugs were a few factors accounting for the 0.7% difference between that forecast and the current estimate.
Medicare spending reached $705.9 billion in 2017, accounting for 20% of total healthcare expenditures. Any slowdown in Medicare growth was "almost entirely offset" by spending for Medicare Advantage plans, officials said. Medicare private plans grew to account for 10% of total Medicare spending in 2017 compared to 8.1% in 2016.
Medicaid spending followed at $581.9 billion, which made up 17% of national health spending. The slowdown for Medicaid spending growth was largely influenced by deceleration in enrollment and a reduction in net cost of insurance through Medicaid.
Despite taking the biggest hit in growth, private health insurance spending topped out at $1.2 trillion in 2017 and accounted for 34% of total national health spending. Slower growth in medical benefits and the impact of the suspension of the Affordable Care Act's health insurance plan fee influenced overall deceleration for private insurers.
Enrollment in private health insurance also slowed, increasing 0.2% compared to 0.4% in 2016.
The number of prescriptions dispensed slowed as well. Price growth slowed for brands and declined for generics, according to Anne Martin, lead author of the report and economist with CMS. That trend was heavily impacted by decreases in the number of prescriptions dispensed for opioids.
"A lot of that did have to do with the opioid epidemic and greater tightening of those types of prescriptions being dispensed," Martin said.
Hospital spending accounted for 33% of overall care spending, reaching $1.1 trillion in 2017. The slowdown from 5.6% growth in 2016 to 4.6% in 2017 was influenced by a lag in use of services — primarily outpatient visits, according to CMS.
Physician and clinical services together represented 20% of care spending, reaching $694.3 billion in 2017. Spending growth for physician services trailed behind growth for clinical services at 3.9% and 5%, respectively. Clinical services growth primarily accelerated due to growth in outpatient visits.
Moody's warned earlier this year that nonprofit and public hospitals are on an "unsustainable path" as margins continue to shrink and they spend more than they earn. Navigant found that hospital margins shrunk by over 39% in the past three years as expenses grow faster than revenue. A recent report by the company said less demand for core hospital services like surgery and inpatient admissions has been caused partly by rising out-of-pocket costs from high-deductible health plans.
CMS officials said higher enrollment in high deductible plans is one of a few factors that could have influenced the overall lower use of care services, as well as the health insurance tax fee and shifts in sites of care.
The health insurance tax fee, officials said, had less of an impact on spending growth for care services overall compared to the slowdown in medical benefits. Officials added that CMS does not have the impact of the fee quantified in its estimate.
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