trump budget drug prices
Here's why drug prices are so high (2018)
01:45 - Source: CNN Business
New York CNN  — 

It may not feel this way, but spending on health care actually grew more slowly last year.

National health care spending increased 3.9% to $3.5 trillion in 2017, mainly because of more muted growth in the use of hospital care, physician services and medications, according to a report Thursday from the Centers for Medicare & Medicaid Services.

Spending on retail prescription drugs rose only 0.4% last year, the smallest increase since 2012. A decline in the number of pain medications, including opioids, dispensed contributed to the slowdown, as did the continued shift to lower-cost generic drugs and a reduction in the growth rate of pricier pharmaceuticals, particularly those used to treat Hepatitis C.

The rising cost of health care is being closely watched by President Donald Trump and by lawmakers on both sides of the aisle.

Both parties have promised to rein in increases in health care spending, particularly the price of medications dispensed at pharmacies and those administered by doctors, which are usually much more expensive. The health care spending report, which was published in the Health Affairs journal, does not include data on doctor-administered medication.

Health care spending accounted for 17.9% of the economy last year, compared to 18% the year before, according to the report. It amounts to more than $10,700 per person.

The slowdown comes after several years of accelerated growth following the opening of the Affordable Care Act exchanges and the implementation of Medicaid expansion in 2014, which sent the newly insured flocking to health providers. Also contributing to the higher rates were the introductions of new, innovative medicines and faster growth in prices for existing brand-name drugs.

These trends pushed up the rate that year and in 2015, when it hit 5.8%, before starting to drift down in 2016 to 4.8%. The rate last year was similar to the average annual growth rate between 2008 and 2013, when the Great Recession and its aftermath helped depress yearly increases.

The federal government enjoyed a more modest uptick in spending growth on health care in 2017 for the third consecutive year, thanks largely to a deceleration in Medicaid enrollment growth, a scheduled reduction in federal funding for Medicaid expansion enrollees and a decline in the cost of coverage for Medicare and Medicaid enrollees in private insurance plans.

State and local governments, on the other hand, saw their spending growth rate increase a bit because states had to shoulder more of the costs of Medicaid expansion enrollees. (Under the Affordable Care Act, the federal government paid the full cost of expansion for the first three years, but only 95% last year.)

Americans also saw a moderation in the growth of their health care spending to 3.8%, down from 4.8% in 2016.

This was largely due to more modest increases in out-of-pocket spending, including copayments, deductibles and other direct payments to providers. In particular, the rate of spending on nursing home and continuing care retirement communities, physician and clinical services and dental services slowed.