United States health spending growth slows, but still rises to 17.9% of GDP

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The share of the economy devoted to healthcare rose slightly from 17.7% in 2015 to 17.9% past year.

But even as spending growth slowed, health expenditures swallowed a greater part of the economy, with health expenditures making up 17.9 percent share of gross domestic product in 2016. Total expenditures reached $328.6 billion. Another factor was a slowdown in the growth of spending on insulin, a lifesaving drug for people with diabetes, in Medicare. Total expenditures in this category reached $664.9 billion, or 20% of overall healthcare spending.

Hospital spending increased by 4.7 percent, reaching $1.1 trillion and representing 32 percent of overall healthcare spending.

This compares to a growth rate of 4.8 percent in 2015.

Medicaid accounts for 17 percent of total national health expenditures. On a per capita basis, national health spending grew at 3.5%, reaching $10,348 previous year. The CMS actuaries also noted that the resulting average increase of 0.2 percentage points per year is almost equal to the historical annual average over the past half-century. Rates spiked in 2015 because more people had health insurance thanks to Affordable Care Act coverage gains in the individual market and Medicaid. Spending growth for clinical services (8.2%) outpaced growth in spending for physician services (4.6%) for the twelfth consecutive year.

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"Over the last decade, the United States 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. The decline was driven by slower enrollment growth following expansion under Obamacare.

That ranged from slower growth in Medicaid spending after the surge in enrollment caused by the Affordable Care Act expansion, to a marked slowdown in prescription drug spending growth that had been pushed higher by the approval of a new, expensive treatment for hepatitis C in 2013.

The slower growth in hospital spending in 2016 reflected a slower growth of 2.3% in the use and intensity of services, lower than the increase of 3.4% in 2015. Medicaid expenditures rose 3.9% to $565.5 billion in 2016, accounting for 17% of total national healthcare spending. State and local Medicaid expenditures grew 3.2 percent in 2016, while federal Medicaid expenditures increased 4.4 percent in 2016. Spending for the program grew at 3.6% in 2016-slowing from 4.8% growth in 2015-while enrollment growth was stable. Authors cited the ramp up of the ACA for the faster growth beginning in 2014.

Out-of-pocket spending includes direct consumer payments such as copayments, deductibles, and spending not covered by insurance. This was mainly due to slower growth in enrollment and retail prescription drugs and a shift to higher deductible plans. This was partly offset by faster growth in hospital prices, which accelerated slightly from 0.9 percent in 2015 to 1.2 percent in 2016. Clinical services spending growth was driven primarily by freestanding ambulatory surgical and emergency centers. Dating back to 1960, the NHEA measures annual US expenditures for health care goods and services, public health activities, government administration, the net cost of health insurance, and investment related to health care. The insured share of the population stabilized at 91 percent in 2016, the same as for 2015 but higher than the shares of 89 percent in 2014 and 86 percent in 2013, the study authors wrote. By 2016, however, the rate of spending growth was more in line with the average annual rate of 4.2% from 2008-15, Hartman said.

Fewer drugs were introduced in 2016 and there was a slower growth in prices for both brand-name and generic drugs. All 3 major payers-private health insurance, Medicaid, and Medicare-also saw lower rates of spending growth.