National health care spending growth slowed in 2017 to the post-recession rate of 3.9%, down from 4.8% in 2016. Per person, spending on health care grew 3.2% to $10,739 in 2017, and the share of GDP spent on medical care held steady at 17.9%.
Healthcare spending in America is a $3.5 trillion micro-economy…roughly the size of the entire GDP of Germany, and about $1 trillion greater than the entire economy of France.
These annual numbers come out of the annual report from the Centers for Medicare and Medicaid Services, published yesterday in Health Affairs.
Underneath these macro-health economic numbers is the fact that inflation averaged 1.6% in 2017. This means that health care spending grew twice the rate of inflation.
The main contributor to spending growth was prices – raising the time-tested mantra of Uwe Reinhardt, “It’s the Prices, Stupid,” coined in a 2013 sentinel essay in Health Affairs. Growth in utilization of medical services dramatically slowed from 2016 to 2016-17 as the bar chart shows. But medical prices march onward and upward.
Even though the growth in health spending has slowed and proportion of GDP remained stable over the past year, the report concludes on a cautionary note: that the past decade was marked with lower overall economic growth of about 3%, and relatively low inflation.
That healthcare represents nearly one-fifth of the national economy means the U.S. economy is, largely, a medical care economy. Sustainability must be the goal going forward.
Health Populi’s Hot Points: While national spending has stayed relatively even — balancing utilization with increasing pricing (remember, spending is a function of Use multiplied by Unit Pricing).
In context, the consumer is bearing more costs, particularly onerous for the middle class. A report published today on the cost of employer-sponsored insurance as a growing burden for the working middle class from The Commonwealth Fund bears witness to this.
The second bar chart illustrates the worker’s cost burden of healthcare for premiums and deductibles. In 2017, that was equal to 12% of median income. [Note that this doesn’t include out of pocket spending, and spending on items people choose to buy to bolster their health — over-the-counter medicines, chiropractic, gym memberships, vitamins and supplements, and other forms of discretionary spending on health we estimate boost personal health spending to closer to $1 in $5 of household income].
After five years of modest premium cost increases between 2011-16, premiums for employer-sponsored health insurance dramatically increased in 2017: for single-person coverage. premiums were over $7,000 in eight states. For family premiums, they were at least $20,000 or higher in seven states and Washington, D.C.
For further context, a new report from Brookings talks about how the Great Recession hurt the middle class – twice. Loss of income and socioeconomic status has been a “double whammy” on the middle class, Brookings’ research has identified.
Wage growth at the top and bottom income quintiles were about the same in both urban and rural areas, as well as in high performing versus recession-hard-hit communities.
But in the middle, quintiles 2 and 3 shown in the third chart, middle-class workers in areas that were harder-hit in the Recession lost a lot of income ground versus peers living in areas that were not as negatively impacted. “If you were unlucky enough to be in the middle class in places like Atlanta, Houston, or St. Louis, instead of Columbus, Kansas City, or San Antonio, the Great Recession hammered you twice,” Brookings found.
It is well understood these days that our ZIP code is more important than our genetic code when it comes to our health status.
Income and job security are social determinants of health. This is a sobering illustration of that fact.