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National Health Spending at $3.5 Trillion in 2017, CMS Says

National Health Spending at $3.5 Trillion in 2017, CMS Says

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WASHINGTON — National health spending grew by an estimated 4.6% in 2017, to $3.5 trillion, up slightly from a 4.3% increase in the growth rate in 2016, officials from the Centers for Medicare & Medicaid Services (CMS) said Wednesday.

The projected increase was due in part to increased growth in Medicare spending and higher premiums for health insurance bought through the Affordable Care Act’s marketplaces, officials said. Over the longer term, national health spending is expected to increase 5.5% annually over the next decade — 1% faster than the increase in the gross domestic product during that period — reaching a total of $5.7 trillion by 2026.

Spending on physician and clinical services grew by an estimated 5% in 2017, to $698.3 billion, a decline from 5.4% in 2016, said Gigi Cuckler, an economist at CMS’s National Health Statistics Group, at a briefing here sponsored by Health Affairs which published a paper containing the CMS study. The proliferation of high-deductible health plans, which encourage less spending on healthcare, will have contributed to that deceleration, she told MedPage Today.

“Research continues to show that this sector is disproportionately impacted … by shifts to these types of plans,” she said. In addition, prices for physician and clinical services grew moderately in 2017, at 2.4%, but are expected to increase slightly faster in 2018, at a rate of 2.8%, Cuckler said.

Healthcare’s share of the gross domestic product is expected to rise from 17.9% in 2016 to 19.7% by 2026, she continued. The health spending and enrollment growth during that time will largely be driven by fundamental economic and demographic factors — projected income growth, increased prices for medical goods and services, and increasing enrollment in Medicare due to the aging of the population.

By 2026, federal, state, and local governments are projected to sponsor 47% of national health spending, up slightly from 45% in 2016, she said. And Medicare growth is expected to increase in the 2021-2026 period in terms of payments to physicians and clinics, “in part related to incentive payments for MACRA [Medicare Access and CHIP Reauthorization Act] legislation,” said Cuckler.

In terms of health insurance, the insured share of the population is expected to decline slightly over time, from 91.1% in 2016 to 89.3% by 2026, in part because the ACA’s individual mandate — requiring people to purchase health insurance or pay a penalty — was eliminated in the tax reform bill passed in December, she said.

Private health insurance spending on medical benefits is expected to have grown relatively slowly in 2017, at 4.7%, Cuckler said. The slower growth is a result of several factors, including the proliferation of high-deductible plans, efforts by employers to manage healthcare costs, and the aging of Baby Boomers into Medicare.

Spending on hospital care, on the other hand, is expected to grow at 5.5% annually over the decade, although 2017 spending is expected to reach $1.1 trillion, representing a 4.6% increase over the previous year — similar to a 4.7% increase in 2016, said Andrea Sisko, PhD, also an economist in the National Health Statistics Group. “While growth is expected to be the same or somewhat faster for most major payers, for hospital spending, growth in private health insurance [hospital payments] is expected to slow by 0.9 percentage points,” she noted.

Spending on prescription drugs is expected to increase an average of 6.3% annually from 2017 to 2026, Sisko said. “The effect of [drug] rebates on spending is expected to level off in the second half of the projection period, as rebates’ share of prescription drug spending is expected to increase more slowly compared to the recent past starting in 2018. As result, prescription spending growth is expected to be stronger than it might have been otherwise, given the greater influence of relatively costly specialty drugs … on overall health spending growth.”

Growth in prescription drug spending is expected to take a bit of a jump soon, from an estimated 2.9% increase in 2017 to a 6.6% increase in 2018. “The dollar value of drugs going generic is predicted to be less of a factor in 2018 than 2017, so price increases of brand name drugs won’t be [ameliorated] by drugs going generic,” Sean Keehan, a senior economist in the National Health Statistics Group, noted on a phone call with reporters Wednesday. “We are also expecting a small increase in the use of drugs in 2018.”

And finally, specialty drugs, such as high-cost cancer drugs, “as we move into the latter stages of the projection period, will exert more influence on spending,” John Poisal, deputy director of the National Health Statistics Group, said on the call.


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