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Trends in Health Care Spending

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Health spending in the U.S. increased by 4.3% in 2016 to $3.3 trillion or $10,348 per capita. This growth rate is lower than what was observed in 2015 (5.8%) and 2014 (5.1%) and closer to the growth rates over the 5-year period ending in 2013 which averaged 3.8% per year.

The deceleration in spending occurred almost across the board for many types of health care services and in many programs. This can be attributed to the leveling off of spending growth in 2016 after relatively high growth rates during the implementation of the Affordable Care Act in 2014 and 2015.

Policy Research Perspective

A new AMA Policy Research Perspective provides an in-depth look at U.S. health spending in 2016.

Health Care Spending Explained

The United States spent $3,337.2 billion on health care in 2016.

This spending can be broken down into the following categories:

  • Hospital care
  • Physician services
  • Clinical services
  • Prescription drugs
  • Nursing care facilities
  • Home health care
  • Other personal health care costs
  • Government administration: includes all administrative costs associated with insuring individuals in health insurance programs
  • Net cost of health insurance: this is the difference between health insurance expenditures and benefits incurred and includes administrative costs, additions to reserves, rate credits and dividends, premium taxes and fees, and net underwriting gains or losses
  • Government public health activities
  • Investment spending

Slow Growth for Physician Services

Over the last 10 years, spending on physician services has grown more slowly than spending in the other large categories of personal health care. Physician spending grew by an average of 3.8% per year between 2006 and 2016.

In comparison, spending on hospital services grew by 5.2%. Clinical spending, which is often reported with physician spending, also grew more quickly than physician spending, at an average rate of 6.5% per year over that period. Prescription drugs spending had an average annual growth rate of 3.9%. Although this is almost as low as that of physician spending, growth in prescription drug spending was the most erratic of the large spending categories; while it fell to near 0% in 2010 and 2012, it also spiked to 12.4% in 2014.

Reducing the Growth of Spending

The AMA is engaged in a number of efforts that have the potential to further reduce the rate of growth in health care costs:

Reducing practice burdens to decrease administrative costs.

  • Working to improve and reform manual, burdensome processes, such as prior authorization, and increase efficiency in physician practices to help reduce administrative costs in health care spending.
  • Supporting the creation, maintenance and adoption of standard electronic transactions. The AMA is an active participant in standard development organizations, such as the Accredited Standards Committee, X12N Insurance Subcommittee, National Council for Prescription Drug Programs (NCPDP) and Health Level 7 International (HL7).
  • Supporting physicians’ interests in reducing administrative burden via testimony before the National Committee on Vital and Health Statistics Subcommittee on Standards, an advisory body that makes recommendations to the HHS Secretary regarding the standard transactions.

Promoting participation in evidence based lifestyle modification programs such as the National Diabetes Prevention Program (DPP) to reduce or delay the onset of diabetes among those with prediabetes.

  • AMA research shows that lifestyle modifications can reduce annual health care costs by nearly $2,700 per participant and have a 3 year ROI as high as 42%*. Use the AMA Diabetes Prevention Program Cost Savings Calculator to determine potential savings for your organization.
  • The AMA is working with the Centers for Disease Control and Prevention to increase physicians’ awareness of and referrals to the CDC-recognized lifestyle change program to mitigate the burdens associated with prediabetes^. Find out more information.

*Source: Khan, Tamkeen, Stavros Tsipas and Gregory D. Wozniak.  Medical Care Expenditures for Individuals with Prediabetes: The Potential Cost Savings in Reducing the Risk of Developing Diabetes. Population Health Management.

^Source: Nhim, Kunthea, Tamkeen Khan, Stephanie M. Gruss, Gregory D. Wozniak, Kate Kirley, Patricia Schumacher, Elizabeth Luman and Ann Albright.  Primary Care Providers’ Behaviors toward Screening, Testing, and Referring Patients with Prediabetes to CDC’s National Diabetes Prevention Program. American Journal of Preventative Medicine.

Previous Policy Research Perspectives

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