US health spending growth slows, but still rises to 17.9% of GDP
- Total nominal U.S. healthcare spending in 2016 rose 4.3% percent to $3.3 trillion, CMS announced in a Health Affairs analysis Wednesday. The increase pushed the category as share of U.S. GDP from 17.7% to 17.9%, with per capita spending increasing $354 to $10,348.
- But health spending growth slowed from previous years due to broad impacts from the Affordable Care Act (ACA) enrollment expansions, lower Medicare and private insurance spending growth rates for fee-for-service and Medicare Advantage, slower and less intense use of hospital care, physician and clinical services; and lower spending on retail prescription drugs.
- The 4.3% increase in 2016 contrasts with health spending increases of 5.1% in 2014 and 5.8% in 2015. In March, a CMS Health Affairs paper predicted that national healthcare expenditures would grow an average of 5.6% per year between 2016-2025.
Despite slower growth in health spending overall, consumers still faced the fastest rate of growth in out-of-pocket spending since 2007, with an increase of 3.9%. 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%.
Retail prescription drug spending growth fell, increasing 1.3% in 2016 to $328.6 billion, following 12.5 and 8.9% increases in 2014 and 2015, respectively. The authors attribute the slowdown to increased generic drug competition and fewer new medicines being approved in 2016, as well as lower spending for pricey hepatitis C medication, which drove high spending in 2014 and 2015.
The fraction of uninsured Americans fell 2.8%, from 29.5 million in 2015 to 28.6 million in 2016, a stark slowdown from 2014 and 2015 where the number fell by more than 17% both years. Authors cited the ramp up of the ACA for the faster growth beginning in 2014.
“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,” said Micah Hartman, a statistician in the Office of the Actuary at CMS.
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.
"Because the unique factors that influenced the health sector over the past decade did not have as great an effect in 2016, this may be an initial indication that this year marks a return to the more typical relationship between annual rates of growth in healthcare spending and growth in nominal GDP," the paper states.
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