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National healthcare spending growth slowed in 2017, CMS says

One reason is the decrease in spending on prescription drugs, from fewer opioids being dispensed to a drop in treatment for hepatitis C.

Susan Morse, Senior Editor

National health spending grew 3.9 percent in 2017, almost 1 percent slower than in 2016, according to a study by the Office of the Actuary at the Centers for Medicare and Medicaid Services.

The federal government's spending on healthcare slowed, increasing 3.2 percent in 2017 after 4.9 percent growth in 2016.

Medicare spending grew at about the same rate in 2017 as in 2016, while Medicaid spending grew at a slower rate.

This was due to lower Medicaid enrollment growth and a decline in the net cost of insurance for Medicare and Medicaid enrollees in private plans in 2017.

As an increasing share of all Medicare beneficiaries enroll in Medicare Advantage plans, growth in fee-for-service Medicare spending dropped to 1.4 percent in 2017, from 2.6 percent in 2016, while spending on private health plans increased from 8.1 percent  to 10 percent.

Lower prescription drug prices contributed to the slow down. In 2017, fewer prescription drugs were dispensed, the shift continued  to lower-cost generics with lower prices for these drugs, and also price increases for some brand-name drugs came down.

Out-of-pocket spending for copayments, deductibles, and spending not covered by insurance grew 2.6 percent in 2017, compared to 4.4 percent growth in 2016. The drivers are not known, but the slowdown in out-of-pocket spending was seen in nursing care facilities, prescription drugs and other professional services.


The number of prescriptions dispensed declined, due in no small part to a decrease in prescriptions for pain due to the opioid epidemic.


The 3.9 percent growth in healthcare spending was slightly slower than growth in the overall economy, which was 4.2 percent in 2017, according to the study. 

Growth in overall healthcare spending slowed for the second consecutive year, following elevated rates of growth in 2014 and 2015 that were affected by Medicaid expansion, private health insurance coverage and increased spending for prescription drugs, particularly those used to treat hepatitis C.

Private health insurance spending increased 4.2 percent to $1.2 trillion in 2017, which was slower than the 6.2 percent growth in 2016.  The deceleration was influenced by slower growth in medical benefits and a decline in fees and taxes resulting from the Consolidated Appropriations Act 2016, which suspended collection of the health insurance provider fee in 2017.


Prescription drugs; hospital care; and physician and clinical services are the three largest categories for healthcare goods and services spending. Prescription drugs make up 10 percent of total healthcare spending. Hospital spending makes up 33 percent and physicians and clinical spending about 20 percent.

Retail prescription drug spending growth slowed in 2017, increasing 0.4 percent to $333.4 billion. This followed 2.3 percent growth in 2016, which was much slower than in 2014, when spending grew 12.4 percent, and in 2015, when spending grew 8.9 percent.

The higher rates of growth in 2014 and 2015 were primarily the result of the introduction of new, innovative medicines and faster growth in prices for existing brand-name drugs.

Hospital spending decelerated in 2017, growing 4.6 percent to $1.1 trillion compared to 5.6 percent growth in 2016. Growth in outpatient visits slowed while growth in inpatient days increased.

Physician and clinical services spending increased 4.2 percent to $694.3 billion in 2017. This increase followed more rapid growth of 5.6 percent in 2016 and 6 percent in 2015. There was a deceleration in growth in the use and intensity of physician and clinical services.

Medicare spending grew 4.2 percent to $705.9 billion in 2017, which was about the same rate as in 2016 when spending grew 4.3 percent.

Medicaid spending growth slowed in 2017, increasing 2.9 percent to $581.9 billion, following growth of 4.2 percent in 2016.  In 2017, states were required to fund 5 percent of the costs of the Medicaid expansion population, while in prior years these costs were funded entirely by the federal government.

Out-of-pocket spending grew 2.6 percent to $365.5 billion in 2017, which was slower than the 4.4 percent growth in 2016.

Growth in household spending on healthcare also slowed in 2017, increasing 3.8 percent following growth of 4.8 percent in 2016.  The slowdown was mainly driven by slower growth in out-of-pocket spending.

Twitter: @SusanJMorse
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