A new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), published today online by Health Affairs, estimates that in 2017, health care spending in the United States grew at a rate of 3.9 percent to $3.5 trillion, or $10,739 per person. Growth slowed for the second consecutive year (following growth of 4.8 percent in 2016 and 5.8 percent in 2015) after expanded insurance coverage and increased spending on prescription drugs contributed to elevated rates of growth in 2014 and 2015. The low rate of spending growth in 2017 was similar to the average annual rate of 3.9 percent during the period 2008–13, which predated the major coverage expansion.

This study will also appear in the January 2019 issue of Health Affairs.

In 2017, growth in GDP accelerated, increasing 4.2 percent from just 2.7 percent a year earlier, while health care spending grew at a similar rate of 3.9 percent. As a result, the share of the economy devoted to health care in 2017 stabilized at 17.9 percent, similar to that in 2016 (18.0 percent). This was the first year since 2013 that this share did not increase.

Slower growth in total health care spending in 2017 was primarily due to slower growth in spending for hospital care, physician and clinical services, and retail prescription drugs, with residual use and intensity of these services contributing substantially to the trend. In addition, spending growth slowed in 2017 for private health insurance and Medicaid, while Medicare spending remained relatively flat.

On a per capita basis, national health spending grew 3.2 percent in 2017, compared to growth of 4.0 percent in 2016. A deceleration in the residual use and intensity of goods and services (particularly hospital care, physician and clinical services, and retail prescription drugs) was a primary contributor to the overall slowdown, increasing 1.1 percent in 2017 compared to 2.1 percent in 2016. Medical price growth, however, accelerated slightly, increasing 1.6 percent in 2017 compared to 1.3 percent in 2016. Changes in the age and sex mix of the population accounted for the remaining 0.5 percentage point of the growth in per capita health spending, a factor whose growth remains relatively steady (see the exhibit below).

“Prior to the coverage expansions and temporary high growth in prescription drug spending during that same period, health spending was growing at historically low rates,” said Anne Martin, an economist in the Office of the Actuary at CMS and first author of the Health Affairs article. “In 2017, health care spending growth returned to these lower rates and the health spending share of GDP stabilized for the first time since 2013.”

Major Payers’ Spending Growth In 2017:

Private health insurance (4.2 percent)— reached $1.2 trillion in 2017 and accounted for 34.0 percent of total national health spending. Private health insurance spending increased 4.2 percent in 2017, which was slower than the growth of 6.2 percent in 2016. This slowdown was influenced in part by slower growth in medical benefits and a decline in fees and taxes resulting from the suspended collection of the health insurance plan fee in 2017. Enrollment in private health insurance also slowed slightly, increasing 0.2 percent in 2017 compared to growth of 0.4 percent in 2016. On a per enrollee basis, private health insurance spending increased 4.0 percent in 2017, which was lower than growth in 2016 (5.8 percent) and in 2015 (5.0 percent).

reached $1.2 trillion in 2017 and accounted for 34.0 percent of total national health spending. Private health insurance spending increased 4.2 percent in 2017, which was slower than the growth of 6.2 percent in 2016. This slowdown was influenced in part by slower growth in medical benefits and a decline in fees and taxes resulting from the suspended collection of the health insurance plan fee in 2017. Enrollment in private health insurance also slowed slightly, increasing 0.2 percent in 2017 compared to growth of 0.4 percent in 2016. On a per enrollee basis, private health insurance spending increased 4.0 percent in 2017, which was lower than growth in 2016 (5.8 percent) and in 2015 (5.0 percent). Medicare spending (4.2 percent)—reached $705.9 billion in 2017, accounting for 20.0 percent of total health care expenditures. Total Medicare spending grew at about the same rate in 2016 and 2017 (4.3 percent and 4.2 percent, respectively). Per Medicare enrollee, spending growth increased 1.7 percent in 2017, similar to the 1.6 percent growth rate in 2016. Fee-for-service Medicare spending accounted for two-thirds of overall Medicare spending in 2017 and increased 1.4 percent, slowing from 2.6 percent growth in 2016. Spending for Medicare private health plans, which made up the remaining one-third of total Medicare spending, increased 10.0 percent in 2017 following growth of 8.1 percent in 2016. Almost every service category within Medicare private health plans experienced faster growth in 2017—most notably hospital care and physician services, which made up 57 percent of total Medicare private health plan spending.

Medicaid expenditures (2.9 percent)—reached $581.9 billion in 2017, accounting for 17 percent of total national health expenditures. Medicaid spending growth slowed for the third straight year, increasing 2.9 percent in 2017 compared to 4.2 percent in 2016. The slower growth in 2017 was influenced by a deceleration in enrollment growth—from 3.0 percent in 2016 to 2.0 percent in 2017. On a per enrollee basis, Medicaid spending increased 0.9 percent in 2017 compared to 1.2 percent growth in 2016, reflecting a decline in the Medicaid net cost of health insurance and a decrease in per enrollee costs for newly eligible adults.

Major Goods And Services’ Spending Growth In 2017: