US Health Care Spending Reached $3.3 Trillion in 2016

DECEMBER 06, 2017
Kevin Kunzmann
health care, spending, costs, drugs, prescriptionsHealth care spending in the US reached $3.3 trillion in 2016, in a return to a lessened spending growth seen from 2008 to 2015.

In analysis released by the Office of the Actuary at the Centers for Medicare and Medicaid Services, the US was estimated to have increased its health care spending by 4.3% last year — a drop in spending growth compared to 2015 and 2014.

Among the main drivers for spending growth were residual use and intensity of goods and sevices (1.6%); increase in medical prices (1.4%); and changes to the population’s age and gender mix (0.6%).

Every US resident spent, on average, $10,348 last year on health care. Though it was a slow growth of spending, it still increased at a rate faster than the gross domestic product growth — increasing the share of economy devoted to health care from 17.7% to 17.9%.

The slowed growth in comparison to recent years is linked to decelerated spending for retail prescription drugs, hospital care, clinical services. All 3 major payers — private health insurance, Medicare, and Medicaid — saw lessened growth in 2016. Private health entities and Medicare reported lesser enrollment growth, while Medicare saw lower per enrollee growth rates.

Among payer entities, private health insurance still saw the greatest increase in spending growth, even at a rate greater than overall health care (5.1%). It reached $1.1 trillion in expenses, but due to enrollment rates and continued shift to high-deductible plans, its rate was notably slower than the growth reported in 2015 (6.9%).

Medicare and Medicaid accounted for a total of 37% of national health expenditures. After reaching a growth rate as high as 11.5% in 2014, Medicaid reported a 3.9% spending growth in 2016. The lone thriving growth in its wealth of goods and services was expenses for nursing care facilities and continuing care retirement communities.

Medicare’s growth rate decline was less significant than the other 2 payers (from 4.8% in 2015 to 3.9% in 2016), but the program was still limited by slowed physician and clinical services, as well as prescription drug spending. Its enrollees’ hospital care spending remained stable from 2015.

The year’s deviation from the growth rate recorded in 2014 and 2015 may be more a return to norm than it is an indication of a slowed market, however. From 2008 to 2015, the average annual health care spending growth rate was actually 4.2%.

Micah Hartman, a statistician in the Office of the Actuary at CMS, and lead author of the to-be published study on the analysis, noted recent fluctuations in cost and spending.

“Over the last decade, the US 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,” Hartman said. “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.”

An article and correspondence regarding the analysis will be launched in January 2018 on Health Affairs. Information regarding the analysis was made available.

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