Published: Fri, December 08, 2017
Finance | By Loren Pratt

Care spending growth slowed considerably in 2016

Care spending growth slowed considerably in 2016

Private health insurance spending climbed 5.1 percent to $1.1 trillion previous year, Medicare spending increased 3.6 percent to $672.1 billion, and Medicaid spending rose 3.9 percent to $565.5 billion. Increased utilization from enrollment expansion and the increasing prevalence of high deductible health plans are likely to have contributed to the trend: 29% of covered workers in 2016 had a high-deductible plan, and average private health insurance deductibles rose 12%.

On Wednesday, a federal study conducted by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) showed that while the overall spending for health services increased in 2016 ($3.3 trillion), the pace at which spending for healthcare slowed down drastically compared to the previous two years. Physician and clinical services and prescription drug spending growth slowed, while Medicare hospital care spending remained relatively stable in 2015 and 2016. There were mixed reasons for the slower growth in hospital spending.

Medicaid spending growth was 3.9 percent in 2016, increasing to $565.5 billion.

Among goods and services, retail prescription drugs saw the lowest growth rate, with physician and clinical services, which make up 20% of overall health spend, up 5.4% and hospital spending up 4.7%, making it 32% of all healthcare spending.

In 2014 and 2015, spending increased 5.1% and 5.8%, respectively, as the Affordable Care Act expanded health insurance coverage through Marketplace plans and Medicaid. It also noted that private insurers, Medicare and Medicaid all saw spending slowed due to lower growth rates per enrollee. Total expenditures reached $328.6 billion.


Private health insurance reached $1.1 trillion and increased 5.1% in 2016, slower than 6.9% growth in 2015.

The 8.2% spending growth for clinical services almost doubled the 4.6% growth in spending for physician services for the twelfth consecutive year. The authors attribute the slowdown to increased generic drug competition and fewer new medicines being approved in 2016, as well as lower spending for pricey hepatitis C medication, which drove high spending in 2014 and 2015.

In all, payers spent $162.7 billion on care at nursing homes and continuing care retirement communities (CCRCs), an increase of 2.9% from 2015.

"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", said Micah Hartman, a statistician in the Office of the Actuary and lead author of a Health Affairs article on the results. Per-enrollee spending also increased at a slower rate than 2015 - 0.8% compared with 2.1%. Despite large fluctuations in growth rates over the past several years, the 10% share of national health spending is similar to the share in 2009.

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