There’s good news in the latest official government report on national health care spending. That will be a surprise to most people who actually use the American health care system.
Last year, the rate of growth in the total amount of money U.S. residents, businesses and governments spent on health care was just 3.9 percent, the lowest since it was 3 percent in 2013. America spent $3.5 trillion on health care in 2017, according to a report by the independent Office of the Actuary at the federal Centers for Medicare and Medicaid Services that appeared in the journal Health Affairs on Thursday.
Health care spending grew more slowly than the economy last year, too, for the first time since 2013, when economic growth also outpaced expenditures on health care. Because of this, the share of the entire economy devoted to health care was 17.9 percent, slightly less than in 2016.
For decades before the late 2000s, health care became an increasingly large portion of the gross domestic product, a trend that many saw as inexorable. Rising health care spending threatened the stability and sustainability of government health care programs like Medicare and Medicaid. It also resulted in a de facto decrease in household income as employers ― which are the biggest source of health coverage ― allocated more and more money to health benefits and less and less to wages.
So the good news is that the health care spending problem has been correcting itself, in a way. The data from last year shows that the major funders of health care ― federal and state governments and employers ― all enjoyed the benefits of slower spending growth.
The bad news is that patients don’t seem to be seeing whatever advantages this brings. Health insurance premiums continue to rise, especially for those who don’t get coverage from employers and must buy it themselves, either from a health insurance exchange or directly from an insurance provider. Prescription drugs make up a fairly small portion of total health care spending, but prices have continued to rise over the years. And with more and more people enrolled in health insurance policies with deductibles in the thousands of dollars a year, patients who have coverage are paying more of the costs for their medicines and treatments than before.
“So the good news is that the health care spending problem has been correcting itself, in a way. ... The bad news is that patients don’t seem to be seeing whatever advantages this brings.”
The tide on overall spending began to turn during the Great Recession from 2007 to 2009 and the years of sluggish recovery that followed, when spending growth slowed. There was nothing unusual about this. Health care spending tends to dip when more people are unemployed and uninsured, and those who remain employed either have less money to devote to health care or are more cautious with their spending when they fear they, too, might become jobless. It also was predictable that the rate of growth in health care spending continued to be lower than in decades past in the first few years after the recessions.
The enactment of the Affordable Care Act occurred during this period, specifically in March 2010. In the years that followed, that law used federal money to expand health coverage through subsidized private health insurance and expanded Medicaid eligibility. That new money being pumped into the system increased the rate of growth, as expected. But the law also included cost-containment provisions, especially significant reductions in how much Medicare pays for hospital care and other medical services, that provided a counter-effect.
In fact, the United States is spending more than $2 trillion less on health care than predicted before the Affordable Care Act became law.
Experts then and now never arrived at a consensus for why double-digit annual percentage increases in national health care spending abated. Everyone agrees that economic downturns and slow recoveries led to less growth in health care spending.
What still isn’t clear is why that trend continued amid the largest increase in health coverage since the creation of Medicare and Medicaid in 1965 coupled with an improving economy and a plummeting unemployment rate.
The rate of growth in health care spending ticked back up in 2014 and 2015 as federal dollars flowed out to expand coverage under the Affordable Care Act. This followed several years of historically low increases in spending.
But the trend reversed itself in 2016 and continued last year, with the rate of increase dropping back down to less than 5 percent, where it had been in the late 2000s and early 2010s.
The actuaries attribute their 2017 findings to many factors, including things like smaller increases in prescription drug prices, mainly related to brand-name drugs facing new generic competition and to fewer extraordinarily high-priced medicines coming to market. The report also notes a decrease in prescriptions for painkillers, which coincides with a nationwide effort to curb the opioid addiction epidemic.
The biggest factor in the return to a low rate of increase in overall spending appears to be slower growth in the amount of health care products and services people consumed, even as prices for health care goods and services grew faster last year than in 2016.
