New Report Shows Health Spending Continues to Rise Faster than Wages

CAHC calls for reform in wake of new report from CMS actuaries showing that health spending reached $3.5 trillion in 2017 alone

(December 7, 2018): The Council for Affordable Health Coverage (CAHC)  – a coalition of employers, insurers, life science companies, PBMs, brokers, agents, patient groups, and physician organizations – responded to a new report in Health Affairs from the CMS Office of the Actuary which showed that healthcare spending increased at a rate of 3.9% in 2017 - faster than wages or inflation - for a total cost of $3.5 trillion last year alone. 

CAHC President Joel White released the following statement:

“While this latest report shows modest improvement from recent years past, it is not a cause for celebration. It shows that, once again, healthcare costs grew faster than average wages or inflation, amounting to $3.5 trillion – or $10,739 per person – in 2017 alone. Spending all that money would be okay if we were getting great value, but government reports show poor outcomes and shorter life expectancy. We will never get a handle on runaway healthcare costs by simply slowing the rate of growth. We must instead fundamentally alter the healthcare cost trend and CAHC has been at the tip of the spear in offering actionable, market-driven solutions to do exactly that,” said CAHC President Joel White.
The majority of the health dollar goes to hospitals and physicians, where costs are growing fastest. Prescription drug spending grew slowest and was the only category of health spending that grew less than wages or inflation.
Among the report’s findings:

  • Hospital spending reached $1.1 trillion in 2017 and represented 33 percent of overall health care spending. Growth in expenditures for hospital care slowed from growth of 5.6 percent in 2016 to 4.6 percent in 2017. The deceleration in hospital spending in 2017 reflected slower growth in use and intensity of goods and services, due primarily to slower growth in outpatient visits.

  • Physician and clinical services spending slowed from a growth rate of 5.6 percent in 2016 to 4.2 percent in 2017, with total physician and clinical services expenditures reaching $694.3 billion in 2017 or 20 percent of overall health care spending. Spending growth for clinical services (5.0 percent) continued to outpace growth in spending for physician services (3.9 percent), as spending for most types of outpatient care centers contributed to the stronger growth in spending for clinical services.

  • Retail prescription drugs expenditures reached $333.4 billion in 2017 and represented 10.0 percent of overall health spending. Growth in spending for retail prescription drugs increased by 0.4 percent in 2017, the slowest rate of growth since 2012, when a large number of blockbuster drugs lost patent protection, driving down prices and total spending. The deceleration in 2017 can be attributed to slower growth in the number of prescriptions dispensed, a continued shift to lower-cost generic drugs, and slower growth in the volume of some high-cost drugs—particularly those that treat hepatitis C.

White added, “Willie Sutton, the famous bank robber, was once asked why he robbed banks. His response was 'that’s where the money is.' This report reinforces the need to focus our attention and enact solutions where they will have the greatest impact – hospitals and physicians. We need to address head on the monopolies and anti-competitive markets that mark the health care landscape and that deliver high prices to consumers. We need more value and more coordinated care by eliminating outdated laws that prevent good outcomes. We also must stop paying for medical errors and must end the practice of surprise billing." 
"At the same time, we should demand more from prescription drugs. Our recent response to the administration’s request for information on its ‘American Patients First’ blueprint, for example, outlined policies that could save up to $47 billion annually in total healthcare costs, according to our internal projections. Meanwhile, our Prescriptions for a Healthy America campaign remains unrelenting in working to put a dent in the $300 billion crisis of medication non-adherence. In 2019, you will see CAHC continue to lead on measures to combat the real drivers of unsustainable health spending, including rising hospital costs, waste and improper payments, and growing spending on healthcare services. As this report shows, the stakes are simply too high to do otherwise," concluded White.