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Report: Growth in U.S. Health Spending in 2013 Was Lowest Since 1960

Medicaid and prescription drugs show modest increase

National health spending grew 3.6% in 2013, the lowest annual increase since the Centers for Medicare and Medicaid Services (CMS) began tracking the statistic in 1960, officials said in a report published in Health Affairs.

Spending slowed for private health insurance, Medicare, hospitals, physicians, clinical services, and out-of-pocket spending by consumers. However, it accelerated for Medicaid and for prescription drugs, according to the report.

Health care spending has grown at historically low rates for the past 5 years, which is consistent with declines generally seen during economic downturns, such as the Great Recession that crippled the U.S. economy at the end of 2007. Looking ahead, “the key question is whether health spending growth will accelerate once economic conditions improve significantly; historical evidence suggests that it will,” the authors noted.

They also pointed out, however, that in the near term, the health sector will “undergo major changes that will have a substantial impact” on consumers, providers, insurers, and sponsors of health care. These are the result of the creation of online marketplaces by the Patient Protection and Affordable Care Act (PPACA), its expansion of Medicaid, a shared federal–state health care program for the poor and disabled, and restraints the PPACA made to the Medicare program, the analysts found.

“The balance of these and many other factors over the next few years will determine how the historically low health spending growth from 2009 to 2013 is viewed: as the temporary aftermath of the great recession or the beginning of a new era,” the authors wrote.

The study found that health care spending rose to $2.9 trillion, or $9,255 per person, in 2013. As a share of gross domestic product, health care remained at 17.4%, the same share since 2009, the CMS researchers found.

The 3.6% spending growth for 2013 tracks a CMS estimate from September and is 0.5% lower than 2012.

Spending on Medicare grew 3.4% in 2013, down from the 4.0% growth in 2012. The difference was due mostly to slower growth in enrollment and to spending changes included in the PPACA, including reductions in federal payments to private Medicare Advantage plans, which offer an alternative to traditional Medicare. The automatic 2.0% federal budget payment cuts, known as “sequestration,” also played a role in reducing Medicare spending, which was nearly $586 billion in 2013. The program accounted for 20% of national health spending, according to the report. Fee-for-service expenditures, which account for 72% of total Medicare spending, were up 1.7% in 2013. Medicare Advantage spending increased 7.8% in 2013, a slower growth rate than the 10.6% increase in 2012.

The growth in Medicare per-enrollee spending was relatively flat, increasing 0.2% after a growth rate of less than 0.1% in 2012. The authors credited younger and healthier baby boomers entering the program.

Medicaid spending increased 6.1% in 2013, following growth rates of 2.5% and 4.0%, respectively, in 2011 and 2012. A variety of factors, including increases in hospital care – which accounts for 36% of Medicaid spending — contributed to the cost increase. The federal government and state and local governments spent $449.4 billion in 2013 on Medicaid, accounting for 15% of total national health expenditures.

Medicaid enrollment grew 2.7% during that time frame, the first acceleration since 2009. Some of the 2013 increase was due to new beneficiaries who enrolled as part of the PPACA’s provision that allowed states to expand their Medicaid programs ahead of the 2014 expansion.

Other key takeaways from the report include the following:

  • Nearly 190 million people –– or 60% of the population –– were covered by private health insurance in 2013. Premiums grew 2.8% compared with an increase of 4.0% in 2012. Low overall enrollment growth, increased use of high-deductible plans, and other benefit-design changes along with the PPACA’s medical loss ratio and rate-review provisions contributed to the decline, CMS found. Private health insurance enrollment increased 0.7% last year, the third straight year of growth.
  • Consumer out-of-pocket spending, including co-payments and deductibles or payments for services not covered by a consumer’s health insurance, totaled $339.4 billion in 2013, or 12% of national health expenditures. The 2013 growth was down from the 3.6% in both 2011 and 2012.
  • Spending for physician and clinical services grew 3.8% in 2013 to $586.7 billion, a slowdown from 2012, when spending grew 4.5%. Expenditures for hospital care increased 4.3% in 2013, slower than the 5.7% rate of growth in 2012. Total spending growth for retail prescription drugs rose 2.5% last year compared with 0.5% in 2012. Drug spending growth increased in 2013 for several reasons, among them higher prices for brand-name and specialty drugs.

Source: Kaiser Health News; December 3, 2014.


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