Growth in 2012 health care spending remained at record low

WASHINGTON (MCT) – Total public and private spending for health care in the United States increased to nearly $2.8 trillion in 2012, or nearly $9,000 per person, according to a government report released Monday.
Jan 7, 2014

 

WASHINGTON (MCT) – Total public and private spending for health care in the United States increased to nearly $2.8 trillion in 2012, or nearly $9,000 per person, according to a government report released Monday.

That 3.7 percent increase from 2011 marked the fourth straight year that national health care spending has grown at the lowest rates ever recorded in the 53 years that the data has been tracked.

"The low rates of national health spending growth and relative stability since 2009 primarily reflect the lagged impacts of the recent severe economic recession," when many Americans lost job-based health coverage and postponed or reduced their doctor visits and medical care as a result, said Anne B. Martin, an economist in the Office of the Actuary at the federal Centers for Medicare & Medicaid Services.

Because total health spending grew more slowly than gross domestic product, the share of the economy devoted to health care fell slightly in 2012 to 17.2 percent, from 17.3 percent in 2011. It was the first such decline in health care spending as a share of the nation's overall economic output since 1997.

Spending for health services typically stabilize two to three years after a recession, as pre-negotiated prices for medical services work their way through the health system and more people become eligible for public programs like Medicaid, said Aaron Catlin, deputy director of CMS' National Health Statistics Group.

The aftermath of a recession also causes employers to adjust the type and generosity of coverage they provide, while consumers curb their consumption of medical care.

"Those types of decisions are not often immediately impacted during a recession," Catlin said. "You see those changes in behavior occur several years after the recession."

From 2010 to 2012, Martin said, the Affordable Care Act has had a "minimal effect" on aggregate national health care expenditures, accounting for an increase of less than one-tenth of 1 percent over the three-year period.

Provisions of the health law that have positively and negatively affected health care spending include Medicaid rebates for prescription drugs, expanded Medicare drug coverage, and dependent coverage for children under age 26. Another contributing factor has been the law's requirement that insurers spend at least 80 percent of premium revenue on medical claims or quality improvements.

The real impact of the health care law on national health expenditures won't be reflected in a meaningful way until 2014 data is detailed. That will include the impact of an estimated 9 million-plus new Medicaid recipients and millions of Americans who must purchase health coverage in 2014 or face a fine under the law's individual mandate.

Many wonder if the improving growth rates reflect a larger, more fundamental change in the health sector that will endure. The report's authors were unable to answer that question in an article that summarized their findings in the January issue of the journal Health Affairs.

"From our perspective, more historical evidence is needed before concluding that we have observed a structural break in the historical relationship between the health sector and the overall economy," the report stated.

The overall growth in 2012 health expenditures was driven by spending increases for hospital care – the largest component of national health spending – patient out-of-pocket expenses, physician and clinical services and spending for Medicaid, the federal-state insurance program for the poor and disabled.

Offsetting those increases were notable declines in 2012 spending growth for retail prescription drugs, nursing care services, private health insurance, and expenditures for Medicare, the federal health insurance program for older Americans.

Spending for hospital services, which grew by 4.9 percent and totaled $882 billion in 2012, was mainly because of higher prices and greater use of higher-level care. Spending for physician and clinical services grew 4.6 percent in 2012 to $565 billion because of increased usage and greater complexity of services being sought.

Spending for Medicaid increased 3.3 percent in 2012 to $421.2 billion. That's up from a 2.4 percent increase in 2011. Both increases represented the smallest growth rates in the program's history, except for 2006, when the Medicare prescription drug benefit was implemented. The new drug benefit changed the way Medicaid paid for some beneficiaries' prescription drugs.

Out-of-pocket spending for co-payments and deductibles reached $328 billion in 2012, up 3.8 percent from 2011 because of increased cost sharing for physician and clinical services.

Spending for prescription drugs reached $263.3 billion in 2012, up just 0.4 percent from 2011. The slow growth was because a large number of blockbuster drugs _ like Lipitor, Plavix and Singulair _ lost their patent protection, which led to greater sales of cheaper generic equivalents.

Premiums for private health insurance grew by 3.2 percent, to $917 billion, in 2012. That's down from a 3.4 percent increase in 2011. The slower growth rate was mainly because of lower overall enrollment growth and increased enrollment in cheaper high-deductible plans.

Medicare spending grew slightly in 2012, reaching $572 billion, even though the program's enrollment jumped 4.1 percent for the largest one-year bump in 39 years as the first wave of aging baby boomers began joining the program. Despite the enrollment increase, Medicare spending grew at a slower rate in 2012 than in 2011 because of a one-time payment reduction for skilled nursing facilities.

 

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