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Pace Of U.S. Health Spending Slows In 2016

(Illustration created using Getty Images)

U.S. 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.

The analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) showed a shift from the dramatic escalation in health spending that accompanied the coverage gains in 2014 and 2015 as millions of Americans found insurance under the Affordable Care Act.

The rate at which spending grew last year was lower across many measures — including figures for Medicare, Medicaid, private insurance, prescription drugs and hospitals — than in the previous two years.

Micah Hartman, a statistician in the Office of the Actuary at CMS and the lead author of the study, said he could not recall the last time that happened.

The slow down was more than federal officials had predicted in a report earlier this year.

Health spending was up 4.3 percent in 2016. In 2014 and 2015, spending increased 5.1 percent and 5.8 percent, respectively, as the ACA provided subsidies to help people get private coverage and most states expanded Medicaid.

In effect, national health spending has returned to the moderate growth levels that followed the 2007-2009 recession.

Still, health spending continues to outpace overall spending on goods and services, which increased 2.8 percent in 2016.

“Costs remain reasonably under control but are still [rising] at a rate that is too rapid to be affordable for society,” said Paul Ginsburg, a health policy professor at the University of Southern California.

Health care consumes nearly one-fifth of the U.S. economy, according to the new data.

Amid calls for the Trump administration to do something about rising drug prices, the report found national spending for prescriptions rose just 1.3 percent in 2016, compared to 12 percent in 2014 and 9 percent in 2015.

The report attributed the deceleration in spending to falling prices and the introduction of fewer new drugs. It also noted a decline in  spending for hepatitis C drugs. Their arrival in 2013 sparked a national debate on prices when the first one — Sovaldi — was being sold for $1,000 a pill, or $84,000 for the 12-week course of treatment.

The $329 billion spent on prescription medications in 2016 represents 10 percent of overall health spending. The report noted that share was similar to 2009’s.

Hospital spending — which makes up the highest share of health expenditures — increased by 4.7 percent last year, a full percentage point lower than in 2015, the report said. Slower growth was due to a leveling in the number of people gaining health coverage last year, according to the researchers.

Spending on Medicaid, the federal-state health insurance program for low-income people, rose by 3.9 percent last year, compared to 9.5 percent in 2015 and 11.5 percent in 2014. Republicans in Congress have tried unsuccessfully to cap federal Medicaid spending to states to help control growth in the program, an effort opposed by Democrats and advocates for the poor. The report noted that Medicaid’s costs per enrollee grew less than 1 percent in 2016.

“This is evidence that states are doing a pretty good job at controlling Medicaid spending,” Ginsburg said.

This study will also appear in the January 2018 issue of Health Affairs but was published online Wednesday.

KFF Health News' coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

Related Topics

Cost and Quality Medicaid Medicare The Health Law