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CMS Reports Slowed Growth of National Health Spending in 2017

For the second consecutive year, growth in national health spending slowed, but still represents an outsize portion of GDP.

National healthcare spending growth slows

Source: Thinkstock

By Chuck Green

- Last year, healthcare spending in the US jumped at an estimated rate of 3.9 percent to $3.5 trillion – or $10,739 per person, according to a new analysis from the Office of the Actuary at the Centers for Medicare and Medicare Services in Health Affairs.

After expanded insurance coverage and increased spending on prescription drugs contributed to elevated rates of growth in 2014 and 2015, growth slowed for the second straight year on the heels of a climb of 4.8 percent in 2016 and 5.8 percent in 2015. The low rate of spending growth in 2017 resembled the average annual rate of 3.9 percent between 2008 and 2013, predating major coverage expansion.

In 2017, growth in GDP accelerated, rising 4.2 percent from 2.7 percent the prior year. Healthcare spending, meantime, spiked 3.9 percent. As a result, the share of the economy devoted to healthcare in 2017 stabilized at 17.9 percent, compared to 18 percent rate in 2016 — the first time since 2013 there was no increase in the share.

Last year saw slower growth in total healthcare spending. It was prompted primarily by similarly shored spending growth in hospital care, physician and clinical services, and retail prescription drugs, with residual use and intensity of these services substantially contributing to the trend. What’s more, in 2017, the growth in spending for private health insurance and Medicaid slowed, and remained relatively flat for Medicare.

National health spending grew 3.2 percent on a per capita basis last year, compared to four percent in 2016. A descent in the residual use and intensity of goods and services; particularly in hospital care, physician and clinical services, and retail prescription drugs, primarily fueled the overall slowdown, escalating 1.1 percent in 2017, down from 2.1 percent the year before. However, medical price growth slightly up ticked, from 1.3 percent in 2016 to 1.6 percent last year.

“Prior to the coverage expansions and temporary high growth in prescription drug spending during that same period, health spending was growing at historically low rates,” said lead author Anne Martin, an economist in the Office of the Actuary. “In 2017, health care spending growth returned to these lower rates and the health spending share of GDP stabilized for the first time since 2013.”

Meantime, the new analysis showed major payers’ spending growth in 2017 included:

Private health insurance (4.2 percent) — Reached $1.2 trillion in 2017, slower than 2016 when growth was 6.2 percent. The 2017 figure accounted for 34 percent of total national health spending. Influencing the slowdown, in part, was slower growth in medical benefits and a decline in fees and taxes, which stemmed from the suspended collection of the health insurance plan fee in 2017.

Medicare spending (4.2 percent) — Reached $705.9 billion in 2017 and accounted for 20 percent of total health care expenditures. In 2017, spending growth spiked 1.7 percent, compared to a growth rate of 1.6 percent the previous year per Medicare enrollee.

Medicare fee-for-service spending accounted for two-thirds of overall Medicare spending in 2017 and increased 1.4 percent. That represents a 2.6 percent growth slowdown in 2016. Meantime, spending for Medicare private health plans — comprising the remaining one-third of total Medicare spending — rose 10 percent in 2017. The previous year, it grew 8.1 percent.

Medicaid expenditures (2.9 percent) — Reached $581.9 billion in 2017, accounting for 17 percent of total national health expenditures. Spending growth slowed for the third straight year. It was 4.2 percent in 2016.

Not surprisingly, wealthy countries like the US tend to spend more per person on healthcare and related expenses than less prosperous nations, according to the Peterson-Kaiser Health System Tracker. However, the US spends more per person on health than comparable countries. Health spending per person in the US. was $10,348 in 2016 — 31 percent higher than Switzerland, the next highest per capita spender.

According to a recent analysis published in JAMA, healthcare accounts for almost 18% of the US GDP, compared to 9.6% to 12.4% in the other developed countries. Healthcare spending in the US is roughly twice that of other high-income nations — but all that extra money isn’t leading to better health.

A group of researchers compared data from the U.S. and 10 other high-income countries: The United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland and Denmark. They found that spending in the US far outpaces that of other nations.

Contrary to popular belief, the researchers didn’t find that people in the US use the medical system significantly more often than those in other countries — nor did they find that the way Americans use the medical system accounts for the disconnect in spending. Underinvestment in social services didn’t appear to explain the difference, either. Instead, high prices for labor and goods — including drugs, procedures and administrative services — are likely the major reasons.

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