National Health Care Spending In 2016: Spending And Enrollment Growth Slow After Initial Coverage Expansions

By Micah Hartman, Anne B. Martin, Nathan Espinosa, Aaron Catlin, and The National Health Expenditure Accounts Team
Health Affairs, January 2018 (Online December 6, 2017)

Abstract

Total nominal US health care spending increased 4.3 percent and reached $3.3 trillion in 2016. Per capita spending on health care increased by $354, reaching $10,348. The share of gross domestic product devoted to health care spending was 17.9 percent in 2016, up from 17.7 percent in 2015. Health spending growth decelerated in 2016 following faster growth in 2014 and 2015 associated with coverage expansions under the Affordable Care Act (ACA) and strong retail prescription drug spending growth. In 2016 the slowdown was broadly based, as spending for the largest categories by payer and by service decelerated. Enrollment trends drove the slowdown in Medicaid and private health insurance spending growth in 2016, while slower per enrollee spending growth influenced Medicare spending. Furthermore, spending for retail prescription drugs slowed, partly as a result of lower spending for drugs used to treat hepatitis C, while slower use and intensity of services drove the slowdown in hospital care and physician and clinical services.

Out-of-pocket Spending

Total out-of-pocket spending (which includes all direct consumer payments such as copayments, deductibles, coinsurance, and spending for noncovered services) increased 3.9 percent in 2016 — the fastest rate of growth since 2007 and higher than the average annual growth of 2.0 percent in 2008–15. In 2016, out-of-pocket spending continued to account for 11 percent of all health care spending, unchanged since 2012.

In 2014 and 2015, out-of-pocket spending grew just 1.5 percent and 2.8 percent, respectively. Growth in both years was affected by changes in health insurance coverage, as the number of uninsured people (who pay out of pocket for a majority of their health care costs) was reduced from 44.2 million in 2013 to 29.5 million in 2015. Concurrently, however, increased utilization resulting from enrollment expansion and an ongoing shift toward enrollment in high-deductible health plans led to more out-of-pocket spending. In 2016, 29 percent of covered workers were enrolled in these high-deductible plans, up from 24 percent in 2015 and 20 percent in 2014, making these plans a likely contributor to the faster growth in out-of-pocket spending in 2016. At the same time, average private health insurance deductibles for single coverage plans increased 12 percent in 2016, compared to 8 percent in 2015 and 7 percent in 2014.

Notably, hospital services experienced more rapid growth in out-of-pocket spending in 2016, with a 4.8 percent increase in such spending following declines of 5.1 percent and 2.8 percent in 2015 and 2014, respectively. This faster growth in 2016 was below the longer-term average annual growth rate of 6.8 percent in 2008–13. The decreases in out-of-pocket hospital spending in 2014 and 2015 were due in part to the expansion in health insurance coverage, while hospitals’ uncompensated care costs declined. In 2016, out-of-pocket spending grew the fastest for durable medical equipment (6.9 percent) and declined for retail prescription drugs (−1.0 percent).

Conclusion

Within the ten-year period 2007–16, the US experienced, among other events, the most severe economic recession since the Great Depression, followed by a mild economic recovery; medical price inflation that was at historic lows; and major changes to the health care system associated with the ACA. During these years, health care spending increased at the lowest rates in the history of the National Health Expenditure Accounts, but low economic growth led to an increase of 2.0 percentage points in the share of the economy devoted to health care, from 15.9 percent in 2007 to 17.9 percent in 2016. The resulting average increase of 0.2 percentage point per year is nearly equal to the historical annual average over the past half-century.

In 2016, as expected, health care spending growth slowed following the major expansion of health insurance coverage in 2014 and 2015, when the ACA expanded eligibility for the Medicaid program and provided access to private health insurance Marketplaces. The insured share of the population stabilized at 91 percent in 2016, the same as for 2015 but higher than the shares of 89 percent in 2014 and 86 percent in 2013. Not surprisingly, federal government spending grew more slowly in 2016, as the initial impacts of enrollment expansion were realized and Medicaid enrollment growth (particularly for the newly eligible) decelerated. At the same time, private health insurance spending growth slowed, as enrollment growth decelerated and the impact of new hepatitis C drugs lessened.

The slower growth in health care spending in 2016 was more in line with the average annual rate of growth during the period 2008–15 and was higher than growth for the overall economy. Because the unique factors that influenced the health sector over the past decade did not have as great an effect in 2016, this may be an initial indication that this year marks a return to the more typical relationship between annual rates of growth in health care spending and growth in nominal GDP. As a result, future health care expenditure trends are expected to be mostly influenced by changes in economic conditions and demographics, as has historically been the case.

https://www.healthaffairs.org…

CMS.gov – National Health Expenditure Accounts (NHEA):
https://www.cms.gov…

The numbers to remember for health care spending in 2016:

National Health Expenditures (NHE): $3.3 trillion
NHE per capita: $10,348
NHE as percent of GDP: 17.9%

The overall findings are pretty much as expected. We have moved past the Great Recession. The increase in spending due to the surge in enrollment in Medicaid and in the ACA exchanges has now leveled off. For pharmaceuticals, the surge in spending for hepatitis C drugs is leveling off. Our total national health expenditures continue to consume an ever greater part of our GDP – now about 18 percent (from 15.9 percent in 2007 to 17.9 percent in 2016).

One item of concern is the out-of-pocket spending. It “increased 3.9 percent in 2016 — the fastest rate of growth since 2007.”

Greater enrollment in high-deductible health plans led to more out-of-pocket spending. “In 2016, 29 percent of covered workers were enrolled in these high-deductible plans, up from 24 percent in 2015 and 20 percent in 2014, making these plans a likely contributor to the faster growth in out-of-pocket spending in 2016. At the same time, average private health insurance deductibles for single coverage plans increased 12 percent in 2016, compared to 8 percent in 2015 and 7 percent in 2014.”

Consumer-directed health care (high deductibles) is impairing the financial security of patients.

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