Health care spending growth almost entirely due to price increases.

KEY TAKEAWAY: Total spending per person is now growing at faster rates than prior years, with 4.6% growth in 2016 compared to. 4.1% growth in 2015, which followed 2 years of sub-3% growth from 2012 to 2014. Spending growth in each year from 2012 to 2016 was almost entirely due to price increases. We saw particularly large increases in spending and price for administered drugs, emergency room (ER) visits, and surgical hospital admissions.  (Source: The Health Care Cost Institute’s (HCCI) 2016 annual report on U.S. health care cost and utilization?

In what is sure to add ammunition to those who say health care spending is out of control the Health Care Cost Institute’s (HCCI) 2016 annual report on U.S. health care cost and utilization indicates what a lot of us already know: it’s costing us all more for a health care system that is inefficient and wasteful.

Consumer out-of-pocket (OOP) spending per person increased, but grew more slowly than total spending. This difference in growth led to a decline in OOP spending as a share of total spending.

From 2012 to 2016, they observed increases in prices each year and across nearly all service categories. [inlinetweet prefix=”” tweeter=”” suffix=””]The greatest cumulative price increase was seen in prescription drugs, with 24.9% price growth.[/inlinetweet] Inpatient services also experienced very high price growth, with prices increasing 24.3% between 2012 and 2016.

Very large price increases for administered drugs drove increased spending, despite utilization declines; PCP office visit use declined while specialist use rose. [inlinetweet prefix=”” tweeter=”” suffix=””]Every class of brand drug experienced double digit drops in utilization accompanied by double digit increases in price – driving the overall increase in spending[/inlinetweet]

It’s a safe bet that price increases are going to be the norm to help pharma companies pay for the expensive acquisitions of other companies.  It also means that new drugs are going to continue to have price tags to alleviate pressure on balance sheets and debt.

You can also bet that politicians, who are calling for universal health care and better negotiating with pharma on drug prices are going to use this data to challenge insurers as well as big pharma.