2016 Healthcare Spending Growth Slowed, Totaled $3.3 Trillion

December 08, 2017 - US healthcare spending totaled $3.3 trillion in 2016, representing a 4.3 increase in the spending growth rate since 2015. While spending continued to rise, the rate of increase was actually slower than the 5.8 percent growth rate between 2014 and 2015, indicating progress with controlling costs national healthcare expenditure data from CMS revealed.

Payer spending growth decelerated in both the Medicaid and Medicare programs as ACA coverage expansions resulted in decreased government healthcare spending, CMS added.  

Notable highlights in the report included spikes in employer-sponsored health plan spending growth, marked deceleration in the growth of prescription drug spending, and decreases in spending growth on the largest healthcare spending categories.

• Employer sponsored health plan spending growth increased by 5 percent from 2015 to 2016, from a previous growth rate of 4.4 percent in 2014 to 2015. Health plans purchased by private businesses for their employees contributed to 20 percent of US healthcare spending.
• Prescription drug spending increased by 1.3 percent from 2015 to 2016, which was much slower than the 8.9 percent spending growth rate from 2014 to 2015. Prescription drugs have historically been one of the fastest growing healthcare spending categories, but 2016 displayed significant improvement.
• Hospital care spending, which accounts for 32 percent of the nation’s healthcare expenses, decelerated from a 5.7 percent growth rate during 2014 to 2015 to a 4.7 percent growth rate during 2015 to 2016. The new growth rate is also a slight decrease from the 4.9 percent rate from 2013 to 2014.
• Physician and clinical care spending growth, the second largest healthcare spending category in the US, experienced 5.4 percent growth from 2015 to 2016 which was lower than 5.9 percent growth from 2014 to 2015. Physician spending grew faster than hospital spending, which may indicate a successful shift from expensive inpatient care to lower levels of treatment for certain conditions.
• Medicaid spending grew by 3.9 percent from 2015 to 2016, compared to a 9.5 percent growth rate from 2014 to 2015, and a 11.5 percent rate from 2013 to 2014. Increases in spending growth from 2014 to 2015 were attributed to initial impacts of the ACA’s expansion of Medicaid enrollment.
• Medicare spending grew by 3.6 percent from 2015 to 2016, which was a slight improvement over a 4.8 percent growth rate from 2014 to 2015 and a 4.9 percent growth rate from 2013 to 2014. CMS added that a slowdown in Medicare spending growth was a result of slower growth in both Medicare fee-for-service and Medicare Advantage programs.

CMS’s data shows that the growth of the US’s healthcare spending categories is trending in the right direction, but spending remains a significant issue for payers, providers, and the healthcare industry as a whole.

US healthcare spending is expected to grow at a rate of 5.3 percent per year from 2016 to 2025, as the price of medical goods and services continues to climb.