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Care spending growth slowed considerably in 2016

07 December 2017

Overall health-care spending in the USA topped $3.3 trillion a year ago, according to a new report released by the Trump administration. There were mixed reasons for the slower growth in hospital spending.

Hartman, a statistician with the Office of the Actuary at CMS, said that he has not seen as broad a deceleration in healthcare spending growth since 2010.

Roughly 10.2 million people gained Medicaid coverage in 2014 and 2015 combined, and 8.7 million people gained private health insurance, taking the insured percentage of the population from 86 percent in 2013 to almost 91 percent in 2015.

The rate of healthcare spending in the United States slowed down past year to levels previously seen between 2008-2015, driven by much slower growth in spending for retail prescription drugs, as well as hospital care and physician and clinical services.

Healthcare spending growth in 2016 actually fell below what CMS actuaries projected a year ago.

The decline was driven by slower enrollment growth in health insurance programs, which in turn lead to decreased use of medical services, the report found.

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"When those initial impacts start to wear off, that's when you're going to see that slowdown that we saw in 2016", the official said.

And, healthcare spending growth easily outpaced the 2.9% rate of growth for the Gross Domestic Product in 2016. The pace of home health spending slowed compared to recent years, though total spending in home health ticked up.

Changes in the age and gender mix of the population accounted for 0.6 percent of the growth. Increases in medical prices accounted for 1.4 percentage points, while growth in the residual use and intensity of healthcare goods and services accounted for the remaining 1.6 percentage points, the report said. Specifically, in 3016, CMS actuaries projected healthcare spending to increase by 4.8 percent and rise to $3.358 trillion. Inpatient days and discharges both declined in 2016 by 0.3% and 0.6%, respectively, following two years of growth. This means slower growth in fee-for-service Medicare spending as MA is value-based. Medicare spending rose 3.6% to $672.1 billion, down from 4.8% growth in 2015, accounting for 20% of total healthcare expenditures.

The growth in clinical services was driven primarily by continued strong spending for freestanding ambulatory surgical and emergency centers.

The report noted that US health spending rose by 5.1 percent in 2014, and then by 5.8 percent in 2015.

"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".

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The report from the Centers for Medicare & Medicaid Services (CMS) shows that health-care spending slowed in 2016. For private health insurance and Medicaid, the slower growth was influenced by decelerated enrollment growth. This was mainly due to slower growth in enrollment and retail prescription drugs and a shift to higher deductible plans.

Private health insurance spending grew by 5.1 percent to $1.1 trillion past year, while Medicare spending grew by 3.6 percent to $672.1 billion. Private health insurance continued to be the largest payer for health care goods and services in the U.S. in 2016-accounting for just over one-third of total healthcare spending. In that report, CMS actuaries projected national health spending to grow at an average rate of 5.6 percent per year from 2016 to 2025 and to grow 1.2 percentage points faster than GDP per year. That's down from 5.8% in 2015 and 5.1% in 2014. Total expenditures in this category reached $664.9 billion, or 20% of overall healthcare spending. During the years of the initial impacts of the ACA expansion, Medicaid spending rose 9.5% last year and 11.5% in 2014 as individuals gained coverage.

This compares to a growth rate of 4.8 percent in 2015. Spending for hospital services hit $1.1 trillion, an increase of 4.7% in 2016. Per capita spending on health care increased by $354, reaching $10,348. Meanwhile, state and federal Medicaid spending collectively hit $565.5 billion in 2016, an increase of 3.9% over the prior years. There were also fewer new, brand name drugs approved in 2016 - 22 new drugs, compared with 45 the previous year.

Medicaid goods and services spending decelerated in 2016, with the exception of nursing care facilities and continuing care retirement communities.

On a per capita basis, national health spending grew at 3.5 percent, reaching $10,348 in 2016.

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Care spending growth slowed considerably in 2016