Health care spending slows down

Gov’t report US health care tab hit $3.3T in 2016

Health care spending slows down

Spending growth slowed in 2016 for private health insurance, Medicaid, and Medicare. That increase was lower than forecast. A year before, spending on such drugs grew by 8.9 percent, and in 2014 by 12.4 percent. Medicaid spending increased 3.9% in 2016, much slower than the rates in 2015 and 2014 (9.5% and 11.5%, respectively), both of which were due to the initial impacts of ACA's expansion of Medicaid eligibility. That's down from 5.8% in 2015 and 5.1% in 2014. From 2008 to 2013, it averaged just 3.8 percent. This means slower growth in fee-for-service Medicare spending as MA is value-based. In addition, medical prices rose less quickly overall than they had in the past. Hospital care expenditure growth slowed from 5.7% in 2015 to 4.7% in 2016.

Medicaid expenditures reached $565.5 billion in 2016, accounting for 17% of total national health expenditures. This compares to spending increases of 5.1 percent in 2014 and 5.8 percent in 2015.

What happens in future years is all but impossible to gauge.

CMS blamed the lethargic SNF spending growth on a slowdown in both public and private health insurance outlays: Medicare spending on skilled nursing and CCRC care rose 4.0% in 2015 and just 1.2% in 2016, while private expenditures rose 5.9% a year ago - as compare to a sizable 14.3% in 2015.

But President Donald Trump and congressional Republicans are chipping away at the Affordable Care Act and its coverage provisions, and they maintain they intend to repeal it entirely.

The share of the economy devoted to healthcare increased from 17.7 percent in 2015 to 17.9 percent in 2016. This was mainly due to slower growth in enrollment and retail prescription drugs and a shift to higher deductible plans. More workers who get health benefits from their jobs and those who buy policies on the individual market, including the Affordable Care Act exchange marketplaces, now have this type of coverage.

For private health insurance and Medicaid, the slower growth was influenced by decelerated enrollment growth, while Medicare spending slowed because of lower enrollment increases due to defections to Medicare Advantage plans. Spending growth for clinical services (8.2%) outpaced growth in spending for physician services (4.6%) for the twelfth consecutive year.

Medicare spending hit $672.1 billion, accounting for 20% of total healthcare expenditures. The decline was driven by slower enrollment growth following expansion under Obamacare. The primary reason for the deceleration in federal spending growth in 2016 was federal Medicaid spending, which grew more slowly in 2016 as a result of less Medicaid enrollment growth. This significant growth in 2014 and 2015 was largely attributable to increased spending on new medicines and price growth for existing brand-name drugs, particularly for drugs used to treat hepatitis C. Growth slowed in 2016 primarily due to fewer new drug approvals, slower growth in brand-name drug spending as spending for hepatitis C drugs declined, and a decline in spending for generic drugs as price growth slowed.

On a per capita basis, national health spending grew at 3.5 percent, reaching $10,348 in 2016.

Spending on retail prescription drugs grew by only 1.3 percent, to $328.6 billion, in 2016.

Changes in the age and gender mix of the population accounted for 0.6 percent of the growth. The 2016 analysis from the Office of the Actuary at CMS was published online Wednesday in Health Affairs and will appear in its January 2018 edition. Overall use and intensity of services was 2.3%, lower than the increase of 3.4% in 2015, due to the effects of the ACA.

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