A new report released by the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary reports a slower growth rate in overall national health spending in 2017 than in 2016. For 2017, the overall national health spending grew at a rate of 3.9 percent, nearly one percentage point slower than 2016 growth.
According to the report, overall healthcare spending growth slowed in 2017 for the tree largest goods and service categories: hospital care, physician and clinical services, and retail prescription drugs. The rate of Medicare spending was mostly unchanged from 2016 to 2017, and Medicaid Spending grew at a slower rate in 2017 than in 2016.
Hospital Spending
Hospital spending, which accounts for 1/3 of total healthcare spending slowed down in 2017, growing at a rate of 4.6 percent to $1.1 trillion as compared to the 5.6 percent growth rate in 2016. The slower growth reflects a slower growth in the use and intensity of services – growth in outpatient visits slowed while inpatient days increased at about the same rate in 2016 and 2017.
Physician and Clinical Services Spending
Physician and clinical services spending, which accounts for roughly 1/5 of total healthcare spending, increased 4.2 percent to $694.3 billion in 2017. This increased followed a 5.6 percent increase in 2016 and 6.0 percent increase in 2015.
Retail Prescription Drug Spending
One of the areas of healthcare spending that we hear about the most is actually the smallest amount of spending out of the big three – only 10 percent of total healthcare spending is on retail prescription drugs. In 2017, retail prescription drug spending increased only 0.4 percent to $333.4 billion. This is down from a 2.3 percent growth rate in 2016, which was far lower than the 8.9 percent growth rate in 2015 and 12.4 percent growth rate in 2014. It is likely that retail prescription drug spending growth slowed in 2017 due to slower growth in the number of prescriptions dispensed, a continuing shift to lower-cost generic drugs, slower growth in the volume of some high-cost drugs, declines in generic drug prices, and lower price increases for existing brand-name drugs.
Healthcare Sponsors
In 2017, the federal government’s spending on healthcare slowed, increasing at a rate of 3.2 percent after 4.9 percent growth in 2016. The deceleration was largely associated with slower federal Medicaid spending due to lower Medicaid enrollment growth, a reduction in the federal government’s share of funding for newly eligible Medicaid enrollees, and a decline in the net cost of insurance for Medicare and Medicaid enrollees in private plans in 2017. Growth in household spending on healthcare also slowed in 2017, increasing 3.8 percent following growth of 4.8 percent in 2016.
Healthcare Spending Compared to the Overall Economy
The 3.9 percent growth in healthcare spending was slightly slower than growth in the overall economy (4.2 percent) in 2017. The healthcare spending share of the economy (17.9 percent) was similar to the share in 2016 (18.0 percent).