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New Health Affairs: Health Spending Growth Remained Low In 2011

January 7th, 2013

A new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), released today in the January 2013 issue of Health Affairs, estimates that health care spending in the United States grew at a rate of 3.9 percent in 2011. That level of annual growth is identical to spending growth rates in 2009 and 2010, which means that growth in all three years has occurred at the slowest rates ever recorded in the 52-year history of the National Health Expenditure Accounts.

Total health care spending growth in 2010 and 2011 continued to track closely with the growth in nominal gross domestic product (GDP) in both years, and the health spending share of GDP stayed stable in 2011 at 17.9 percent. Yet despite the overall stability in health spending, “we observed faster growth in spending among some payers and services in 2011,” said Micah Hartman, a statistician in the Office of the Actuary at CMS and lead author of the Health Affairs article.

Hartman and his colleagues discussed their findings at a Washington DC media briefing this morning. In addition to the CMS spending report, the new Health Affairs issue, “Transforming The Delivery Of Health Care,” explores the opportunities and challenges involved in achieving better health and health care at lower costs.

2011 Spending Trends

In 2011, there was slower growth than in 2010 in the net cost of insurance and in noncommercial medical research. There was also a decline in spending in government public health activities. At the same time, there was faster growth in spending in 2011 than in 2010 for personal health care goods and services. Growth in this category was mainly due to an increase in nonprice factors, such as the use and intensity or complexity of services.

Faster growth in personal health care spending in 2011 was also driven by increased growth in spending for retail prescription drugs and physician and clinical services, which was partly offset by slower growth in spending for hospital services. Furthermore, from a payer perspective, spending for Medicare, private health insurance, and consumer out-of-pocket payments increased faster in 2011 compared to 2010, although spending for the Medicaid program grew more slowly.

On the whole, the impact of provisions of the Affordable Care Act on aggregate health spending growth in 2010 and 2011 was minimal. However, there was some impact on certain subcomponents of national health expenditures; for example, private health insurance spending and enrollment were impacted by the provision that expanded private health insurance coverage to dependents of enrollees up to age 26.

The major areas where spending growth accelerated in 2011 (over 2010) were:

  • Retail prescription drugs (2.9 percent)—spending growth accelerated from 0.4 percent growth in 2010, partly because of price increases in brand-name and specialty drugs
  • Physician and clinical services (4.3 percent)—spending grew faster in 2011 compared to growth of 3.1 percent in 2010 and was due primarily to increased growth in nonprice factors, such as the use and complexity or intensity of services that more than offset slower growth in prices for these services
  • Medicare spending (6.2 percent)—this faster growth (compared to 4.3 percent growth in 2010) is attributable to a one-time increase in spending for skilled nursing facilities and faster growth in spending for physician services under fee-for-service Medicare and for Medicare Advantage spending
  • Private health insurance (3.8 percent)—the acceleration (from 3.4 percent growth in 2010) was mainly due to private health insurance enrollment increasing 0.5 percent in 2011, after declining each year from 2008 to 2010
  • Out-of-pocket spending (2.8 percent)—spending growth increased faster in 2011 compared to 2010, when growth was 2.1 percent, and was partially due to higher cost sharing and increased enrollment in consumer-directed health plans

The major areas where spending growth slowed (from 2010) were:

  • Hospital spending (4.3 percent)—the slowdown from 4.9 percent growth in 2010 is attributable to slower growth in the prices charged by hospitals and low growth in use of hospital services and in Medicaid spending for hospital care
  • Medicaid expenditures (2.5 percent)—growth slowed from 5.9 percent in 2010 and was mainly due to continued financial pressure on state budgets because of the economy and a shift in the share of spending from the federal government to the states (a result of expiration of enhanced federal aid to states in June 2011), as well as slower enrollment growth in the program (from 4.9 percent in 2010 to 3.1 percent in 2011).

Looking To The Future

Later this year, Health Affairs will publish the CMS Office of the Actuary’s health care spending projections for the coming decade. In the 2011 spending report, Hartman and his colleagues note some signs of change from the past two years’ very slow spending growth, such as faster increases in the use and intensity of health care goods and services and a halt in the decline of private insurance enrollment.

“Nonetheless, economic, income, and job growth in 2011 was modest and less than might normally be expected during an economic recovery,” they write. “This fact raises questions about whether the near future will hold the type of rebound in health care spending typically seen a few years after a downturn.”

At the media briefing, CMS Chief Actuary Rick Foster said that the coming expansion of health coverage under the Affordable Care Act, together with the propensity of covered individuals to consume more health care, would tend to increase health spending. But he also observed that, particularly given Medicaid’s low provider-payment rates, treatment for someone newly covered under that program could be less costly than emergency department treatment at walk-in rates.

Pent-up demand left over from people forgoing elective care during the recession could increase spending growth, said Foster, who is retiring at the end of this month. On the other hand, increasing numbers of providers are “getting it,” realizing that greater efficiency will be required,” he said, although he noted the lack of concrete results to date.

“I think it’s fair to say that there is a tremendous amount of uncertainty about all of this,” Foster said. “The projections team is going to have their work cut out for them.”

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1 Response to “New Health Affairs: Health Spending Growth Remained Low In 2011”

  1. marvinlzinn Says:

    First: I expect actual cost has increased more, because from my experience inflation is three times what the government calculates (mostly from food). Yes, the cost can be less with lower quality or faster activity, which also causes more mistakes and winds up costing more, but not seen connected to the same treatment. (Drug side effects, for instance.).

    Second: Prevention is always better than correction. The government does have good regulations for some of this, but rules and laws become so complicated or more expensive, so many are missed. If we give more time to our thoughts about procedures that could also reduce the total cost, but most citizens, especially businesses, put profits above it. (Lack of a more expensive ladder caused my fall head-first to the floor with seven weeks coma.)

    Third: The best solution to problems is individual responsibility. Laws against something will not prevent danger, and often increase profits. Starting with our children, we must have citizens realize the health loss of junk; cheap things always cost more in the future. Pay attention to facts, and ignore the lies in advertisements, including drugs. Poison may taste a lot better, so insurance will also cost a lot more. Sugar is the worst addictive drug in the world, so tax that heavily to pay its real cost.

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