National Health Spending in 2016

By December 11, 2017 Commentary

The Office of the Actuary at CMS releases an annual report covering national health spending and the one covering 2016 is out.   (CMS Report)   Here are the high (or low) lights.  Spending grew 4.3% to $3.3 trillion or $10,348 per person.  That is a lot of money, in fact, it is 17.9% of our GDP, up from 17.7% in 2015.  And this is considered moderate growth, and it is compared to some prior years.  By category of spending, hospital care cost $1.1 trillion, up 4.7%, which is still lower than the 5.7% growth rate in 2015.  This represented 32% of all spending, so stop the presses, it is probably where to spend the most effort trying to reduce costs.  Outpatient physician and clinical services are 20% of the bill, at $665 billion, and grew the fastest of the major service categories, at 5.4%, although that is still slower than in 2015.  Drugs are 10% of spending and rose only 1.3%, a substantial decline from 2014’s 12.4% and 2015’s 8.9%.  Fewer new drug approvals and competition in categories like hepatitis C drugs helped.  No other category accounts for even 5% of total spending and none showed dramatic rises or declines.

By source of funds, Medicare paid 20%, or $672 billion of the total, a growth rate of 3.6%, which was a very welcome decline from a 4.8% increase in 2015.  Medicaid represents 17% of all spending, and rose 3.9% to $565.5 billion.  Medicaid had experienced increases of 9.5% in 2015 and 11.5% in 2014, largely because of the reform law’s Medicaid expansion provisions.  Private health insurance still pays for 34%, the largest single source, or $1.1 trillion, rising at 5.1% clip in 2016.  This is an improvement from 2015’s 6.9% rate of growth.  And out-of-pocket spending, which affects consumers the most directly, is 11% of the total, increasing 3.9%.  But please note that this does not include premium contributions by individuals to either individual or group insurance.  That would add very substantially to the total out-of-pocket spending for consumers.  And in fact, the federal government and households were the largest shares among type of payer, at 28% each, followed by private companies at 20% and state and local governments at 17%.  Private companies experienced the fastest growth at 5% in 2016, while household spending rose 4.6%, federal government spending at 3.9% and state and local costs at 2.8%.  Overall, you have to say there is still a lot of pain in health spending for all concerned and no clear signs of significant relief that would take growth down to or below GDP or personal income rates of increase.

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