2017 National Health Spending

By December 11, 2018 Commentary

CMS’ Office of the Actuary keeps the national health expenditure accounts and releases an annual report showing trends.  The latest one, published in Health Affairs, covers 2017.   (OOA Report)   Overall, spending rose 3.9% in 2017, about one percentage point slower than growth in 2016.  Medicare spending rose at about 4.2% to $706 billion, which was 20% of all spending.  It rose at about the same rate in 2016.  Medicaid spending, 17% of the total, had slower growth at 2.9%, down from 4.2% in 2016.  Medicaid enrollment slowed, partly due to the strong economy and that contributed to the lower growth rate. In a warning sign, the state and local contributions to Medicaid rose 6.8%, as they were required to support more of the cost for the Medicaid expansion.  Private health insurance pays for 34% of all health spending and increased 4.2% to $1.2 trillion, a reduction from 6.2% growth in 2016.  Finally, consumers pay for 10% of health spending out-of-pocket and that grew 2.6% in 2017 to $365.5 billion, while growth had been 4.4% in 2016.

In terms of categories, hospital spending was 33% of the total and rose 4.6% to $1.1 trillion.  Growth in hospital spending had risen 5.6% in 2016.  The reduction in growth was largely due to slower utilization rises.  Physician and clinical services increased 4.2% to $694 billion and was 20% of all spending.  Physician spending had also grown 5.6% in 2016.  The slower rate of increase was also due to utilization deceleration.  Drugs have surprisingly been a relative bright spot.  They accounted for 10% of all spending, but increased only .4% in 2017 to $333 billion.  The rise had been 2.3% in 2016, but 8.9% in 2015 and 12.4% in 2014.  The most likely explanation is fewer introductions of new drugs that target large populations.  The moderation in growth is welcome and similar to that reported in other recent research, but absolute spending is high and consumers continue to perceive it as a major financial problem.  Pricing is the major driver of spending and solutions to slow or even reverse the rise in expenditures will have to target pricing.

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