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Physician Services to Decline With More Cost-Sharing, CMS Says

— Use of physician services increased slightly in 2016, but is projected to slow during the next 9 years as employers increasingly shift costs to workers and use other cost-curbing tools, federal economists say.

Private health insurance still covers the lion’s share of Americans who have insurance, which gives it greater weight in health spending and use estimates, said the economists, from the Centers for Medicare & Medicaid Services (CMS). They delivered their annual snapshot of a decade’s worth of national health expenditures at a briefing today in Washington, DC.

The estimates, which are based on current law, were also published online today in Health Affairs.

The CMS economists would not speculate on whether or how changes in the Affordable Care Act might affect their estimates, but Alan Weil, editor-in-chief of Health Affairs, said even though the estimates could be moot with a repeal or a significant change in the Affordable Care Act, the figures give a baseline. In addition, he said, “knowing where we’re going is still important.” The details of the estimates also indicate “where political and policy pressure will be,” as legislators grapple with overturning or retooling the law, Weil said.

In 2016, total spending grew more slowly, at a rate of 4.8%, than in 2015 (5.8%), and also more slowly than in most of the recent past, hitting a total of $3.4 trillion.

Use and intensity of services and prices are the two biggest components of American health spending growth, the economists said. Overall use and intensity of healthcare goods and services continued to grow in 2016 as more people gained healthcare coverage through Medicare, Medicaid, or private insurance, and as disposable personal income rose.

Physician and clinical services grew an estimated 6.6% in 2016, to $677 billion, which is up from a 6.3% increase in 2015.

However, that upward trend is expected to moderate from 2018 through 2025, dropping to 5.9% initially and to 5.5% in 2025, as employers adopt cost-sharing strategies such high-deductible health plans and cost-reduction tools such as prior authorization, the economists said.

Historical data show that greater cost sharing leads to less use of healthcare, Sean Keehan, a CMS economist, told Medscape Medical News. “People think twice about seeing the doctor if it’s going to be much more than it was before,” said Keehan, who is also lead author on the article inHealth Affairs.

Other factors affecting demand will also come into play in 2020 to 2025, CMS economist Devin Stone told Medscape Medical News. He and his colleagues predict slower growth in disposable income and increasing prices for healthcare, “which places downward pressure on demand for services,” Stone said.

In 2016, prices for physician and clinical services increased by a meagre 0.2%. It was a 1.3% rise from the previous year, because pricing increases were historically low, at −1.1% in 2015, largely because Medicaid had stopped a temporary pay increase for primary care physicians.

The nation is coming off a period of low medical-specific price inflation, averaging −0.2% from 2014 through 2016, which was the lowest rate since 1973. But that is expected to rebound going forward, driven mostly by overall inflation.

Medicare, Medicaid Growth Continue

Medicaid saw a big uptick in enrolment and spending during the last few years, largely driven by the Affordable Care Act. However, that is expected to have declined dramatically in 2016 and is not expected to begin rising more substantially until 2018, the economists said.

In 2015, spending by the program grew 9.7%, but it will likely grow a paltry 3.7% in 2016 because of slower enrollment growth, the CMS economists said.

In a few years, however, Medicaid spending is likely to be back on track to grow 6.2% a year, mostly because there will be fewer younger and healthier enrollees and more of the traditional older, sicker, disabled, and more costly enrollees, they said.

Medicare spending grew 5.0% in 2016, which was below its historical average growth. However, 2017 will see an increase, with more spending on physician, clinical, and hospital services. The economists said they expect to see a return to high rates of Medicare growth beginning in 2018, as Baby Boomers age.

Drug Costs, Uninsured Fall

The biggest slowdown in major goods and services spending in 2016 was for prescription drugs, the economists said. Prescription drug spending rose 9.0% in 2015, but increased just 5.0% in 2016, largely because of a decrease in the use of costly hepatitis C therapies.

Drug spending is expected to rebound in 2018, however, as fewer brand-name pharmaceuticals lose patent protection. By 2025, drug spending is expected to increase by a little more than 6%, which is below the double-digit increases seen early in the 2000s.

Finally, the economists said the number of uninsured in America will continue to decrease, with growth in enrollment in private health insurance in 2016 and further enrollment growth in Medicare and Medicaid throughout the next decade.

Overall, 91.5% of Americans will have insurance in 2025, up from 90.9% in 2015, they said.

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