CMS reports slowed health spending growth

CMS reports slowed health spending growth

USA 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. During a call explaining the results, Micah Hartman, a statistician with CMS and an author of the report, said there was more spending and faster growth in 2014 and 2015 as more people gained health insurance coverage through the Affordable Care Act (ACA) and through expanded coverage through the Medicaid program.

During the previous two years, health care spending in the US rose by 4.3% as a result of prescription drug purchases induced by Obamacare.

"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", said Micah Hartman, a statistician in the Office of the Actuary at CMS and lead author of the Health Affairs article.

The slow down was more than federal officials had predicted in a report earlier this year. On a per enrollee basis, private health insurance spending increased 5.1% in 2016, about the same as 2015. There were mixed reasons for the slower growth in hospital spending. It also noted that private insurers, Medicare and Medicaid all saw spending slowed due to lower growth rates per enrollee.

And, healthcare spending growth easily outpaced the 2.9% rate of growth for the Gross Domestic Product in 2016.

Spending on retail prescription drugs grew 1.3 percent in 2016 compared with 12.4 percent in 2014 and 8.9 percent in 2015. Medicaid hospital spending also fell because of a decline in supplemental payments to hospitals. 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.

Retail prescription drugs expenditures reached $328.6 billion and represented 10% of overall health spending. 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. The share of the economy devoted to healthcare rose slightly from 17.7% in 2015 to 17.9% past year. Slower growth was due to a leveling in the number of people gaining health coverage a year ago, according to the researchers. However, spending growth slowed to 3.6 percent from 4.8 percent in 2015, driven by slower spending per enrollee on both the fee-for-service and Medicare Advantage portions of the program.

Medicaid, which provides health coverage to primarily poor people, is jointly run by the federal government and individual states.

KHN's coverage of prescription drug development, costs and pricing is supported by the Laura and John Arnold Foundation.

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