Healthcare spending slows for 2nd consecutive year, remains at 18% of GDP

Healthcare spending in the United States decelerated once again in 2017 to a growth rate of 3.9%, nearly a full percentage point lower than in 2016, according to new statistics released by the federal government on Thursday.

It’s the second consecutive year that healthcare spending has slowed, stabilizing healthcare’s share of the nation’s gross domestic product at 17.9%. Healthcare spending totaled $3.5 trillion, or $10,739 per person, and grew at a slightly slower rate of the overall GDP.

The lower rate is attributed to slower growth in the use and intensity of services in hospitals, clinics and physician offices, which make up 63% of healthcare spending, according to data released by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) and published in Health Affairs.

Hospital spending, which accounts for a third of healthcare expenditures, grew 4.4% in 2017 to $1.1 trillion compared to 5.6% in 2016. Outpatient services decelerated, while inpatient days increased at roughly the same rate. Physician and clinical services spending growth dropped to 4.2% from 5.6% in 2016.

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Retail prescription drug spending increased just 0.4% to $333.4 billion, down from 2.3% in 2016, thanks primarily to a decrease in the number of prescriptions dispensed. The crackdown on opioid prescriptions played a significant role, according to Anne Martin, lead author of the study and an economist in the National Health Statistics Group at the CMS Office of the Actuary.  

“The number of prescriptions for pain had a large impact on the trend and a lot of that did have to do with opioid epidemic and tightening of prescriptions being dispensed,” she said on a call with reporters.

Overall healthcare spending growth began slowing in 2016 when it hit 4.8%. That’s a correction from last year’s report, which pegged the growth rate at 4.3%. Researchers clarified that the growth rate was revised to account for $23.8 billion in additional spending that was not factored in last year.  

Healthcare spending growth picked up in 2014 and 2015 due primarily to new coverage through the Affordable Care Act marketplaces and Medicaid expansion. Though the use and intensity of medical services has declined, medical prices have grown, accounting for half of the per capita health spending growth rate. Overall, the federal government's healthcare spending grew 3.2% in 2017, down from 4.9% the previous year. 

Other notable findings:

  • Spending on durable medical equipment (DME) and residential and personal care were the only services to increase in 2017. DME spending grew 6.8%, up from 4.8% in 2016.
  • Private health plans saw a significant drop in spending growth, from 6.2% in 2016 to 4.2% in 2017.
  • Medicare remained flat, while Medicaid rates dropped from 4.2% to 2.9%.
  • Households and the federal government still account for the majority of healthcare spending at 56%.
  • Out-of-pocket spending slowed considerably, dropping to 2.6%, or $366 billion, in 2017, from 4.4% in 2016. Likewise, household spending on healthcare slowed a full percentage point to 3.8%.