5 things to know about slower health spending growth

CMS reported national health spending grew at a slower rate in 2016, increasing by 4.3 percent with slower growth across almost all spending categories, including private health insurance, Medicare, Medicaid and retail prescription drug spending.

The study, published online by Health Affairs, found one exception to the slower growth: out-of-pocket spending, which in 2016 grew by 3.9 percent to $352.5 billion, its fastest rate of growth since 2007 and nearly double the average annual growth recorded between 2008 and 2015. The report pinned the increase on the increasing prevalence of high-deductible health plans.

“Over the last decade, the US has experienced unique events that have affected the healthcare sector, including the most severe economic recession since the Great Depression, major changes to the healthcare system because of the (Affordable Care Act), and historic lows in medical price inflation,” said Micah Hartman, a statistician in the Office of the Actuary at CMS and lead author of the study. “In 2016, the slowdown in healthcare spending followed significant insurance coverage expansions under the ACA and very strong growth in retail prescription drug spending in 2014 and 2015.”

Here are five takeaways from the report:

1. Overall health spending growth slowed to 4.3 percent, down from 5.1 percent in 2014 and 5.8 percent in 2015. While more in line with the 2008-2015 annual average growth of 4.2 percent, it still outpaced growth in gross domestic product (GDP), meaning the share of the economy devoted to healthcare grew to 17.9 percent. Total health spending hit $3.3 trillion, or $10,348 per person in the U.S, a per capita increase of 3.5 percent.

2. Private health insurance spending grew by 5.9 percent to $1.1 trillion in 2016 after 6.9 percent growth in 2015. The report credited this to a slowdown in enrollment after rapid expansion in 2014 and 2015 thanks to the ACA.

3. Government programs also reported slower growth. Medicare spending grew 3.6 percent to $672.1 billion in 2016, compared to 4.8 percent growth in 2015 and 4.9 percent growth in 2014. Medicare fee-for-service spending growth slowed from 2.2 percent in 2015 to 1.8 percent in 2016 and Medicare Advantage dropped from 11.1 percent in 2015 to 7.4 percent in 2016. Medicaid spending growth dramatically slowed in 2016 to 3.9 percent—down from 11.5 percent in 2014 and 9.5 percent in 2015 after the ACA expanded elgibility.

4. Retail prescription drug spending also saw a dramatic shift in spending growth. 2016 saw a 1.3 percent increase, compared to 12.4 percent growth in 2014 and 8.9 percent in 2015. CMS attributed the slowdown to fewer new drug approvals and a decline in spending on expensive hepatitis C drugs.

5. Major services also fit the pattern of slower spending growth in 2016. Physician and clinical services increased by 5.4 percent in 2016 (down from 5.9 percent in 2015), totaling $664.9 billion with strong growth shown among freestanding ambulatory surgical and emergency centers. Hospital spending growth slowed from 5.7 percent in 2015 to 4.7 percent in 2016.