Pension & Benefits News Growth in health care spending slowed in 2017, CMS reports
Thursday, December 20, 2018

Growth in health care spending slowed in 2017, CMS reports

By Pension and Benefits Editorial Staff

According to a recent report by CMS’ Office of the Actuary, national health spending overall grew at a rate of 3.9 percent in 2017, a rate that is nearly a full percentage point slower than 2016 growth. The spending amounts to $3.5 trillion or $10,739 per person. The growth in health care spending was slightly slower than growth in the overall economy (4.2 percent) in 2017. Despite the slowdown in spending, as a share of the nation’s gross domestic product (GDP), health care spending in 2017 remained relatively flat, making up 17.9 percent of the economy, similar to its share in 2016, which was 18.0 percent.

As reported by CMS, 2017 saw slower growth in total health care spending. It was prompted primarily by slowed spending growth in hospital care, physician and clinical services, and retail prescription drugs. This decline, according to CMS, was largely due to slower growth in outpatient visits and flat growth in inpatient stays. Physician and clinical services spending slowed to 4.2 percent, or $694.3 billion, following faster growth of 5.6 percent in 2016. The decline was largely a result of a downturn of growth in the use and intensity of physician and clinical services. Hospital care expenditures also slowed among all payers—private health insurance, Medicare, and Medicaid.

In 2017, the growth in spending for private health insurance and public health insurance slowed. Private insurance growth dropped 2 points compared to 2016, which saw growth increase at a rate of 6.2 percent, influenced by a decline in fees and taxes resulting from the Consolidated Appropriations Act of 2016. Although Medicare spending grew at about the same rate in 2017 as in 2016, Medicaid spending grew at a slower rate, increasing only 2.9 percent in 2017, compared to 2016 in which it increased at 4.2 percent.

Health spending by households grew at a rate of 3.8 percent, which dropped from 4.8 percent in 2016. The slower growth in 2017 was largely due to a decline in out-of-pocket spending. Out-of-pocket expenditures increased 2.6 percent in 2017 compared to 4.4 percent growth in 2016. Despite the slower growth in 2017, households still represent 28 percent of health care spending, a share that has remained unchanged since 2014.

One area that saw an increase in spending over 2016, was in the "other health, residential, and personal care services" category. This category includes expenditures for medical services that are customarily delivered by providers in non-traditional settings such as schools, as well as by ambulance providers, residential mental health, and substance abuse facilities. Those services grew 5.6 percent in 2017 to $183.1 billion after increasing 5.3 percent in 2016. The slight acceleration was driven by faster growth in residential mental health and substance abuse facilities and ambulance services.


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