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US Health Care Spending Reached $3.3 Trillion in 2016

07 December 2017

Together, Medicare and Medicaid made up 77% of home health spending in 2016. Private health entities and Medicare reported lesser enrollment growth, while Medicare saw lower per enrollee growth rates.

Despite the slower growth in 2016, health care spending still increased faster than the rate of growth for GDP.

The slowdown in health spending growth was seen broadly across all major forms of private and public insurance, and in medical services, prescription drugs and other goods, according to an official analysis released Wednesday. There was also an uptick in employer-sponsored coverage due to an improving economy. The decline was driven by slower enrollment growth following expansion under Obamacare. These losses were offset by faster growth in hospital prices, which accelerated slightly from 0.9 % in 2015 to 1.2 % in 2016.

US health spending rose to $3.3 trillion in 2016, but the pace slowed compared to the previous two years as demand for drugs, hospital care and physician services weakened, according to a federal study released Wednesday.

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"Over the last decade, the USA 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", Micah Hartman, a statistician in the Office of the Actuary and lead author of the report, said in a press release.

The findings, published Wednesday by Health Affairs, are considered the authoritative breakdown of American health care spending and are prepared each year by the Centers for Medicare and Medicaid Services.

Spending on Medicaid, the federal-state health insurance program for low-income people, rose by 3.9 percent past year, compared to 9.5 percent in 2015 and 11.5 percent in 2014. A new generation of expensive hepatitis C drugs drove national drug spending 12.4 percent higher in 2014 and 8.9 percent higher in 2015. Meanwhile, state and federal Medicaid spending collectively hit $565.5 billion in 2016, an increase of 3.9% over the prior years. Growth in spending for retail prescription drugs increased 1.3% percent in 2016, following much stronger growth rates in 2014 and 2015 (12.4% and 8.9%, respectively). Physician and clinical servicesPhysician and clinical services spending slowed from a growth rate of 5.9% in 2015 to 5.4% in 2016. For major payers, Medicare spending growth was flat for the fourth consecutive year. By 2016, however, the rate of spending growth was more in line with the average annual rate of 4.2% from 2008-15, Hartman said.

"Not surprisingly, federal government spending grew more slowly in 2016, as the initial impacts of enrollment expansion were realized and Medicaid enrollment growth (particularly for the newly eligible) decelerated". Slower growth was due in part to slower enrollment growth and was partly offset by faster growth in hospital prices, which accelerated slightly from 0.9% in 2015 to 1.2% previous year. The drop-off in 2016 can be attributed to a decline in spending for drugs used to treat hepatitis C, the introduction of fewer new drugs, and slower growth in prices for both brand name and generic drugs. 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. 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.

US Health Care Spending Reached $3.3 Trillion in 2016