2013 Health Spending Grew at Slowest Rate Since 1960, CMS Says
Health care spending in 2013 grew by 3.6%, the slowest rate since 1960, according to a report released by the Obama administration on Wednesday, the New York Times reports (Pear, New York Times, 12/3).
The 3.6% increase is down from 4.1% in 2012 and significantly lower than health spending growth in 2002, when the growth rate reached nearly 10% (Levey, Los Angeles Times, 12/3).
According to the administration, the country spent $2.9 trillion on health care in 2013, or an average of $9,225 per person, up from $8,915 in 2012 (Viebeck, The Hill, 12/3). Such spending grew at around the same pace as the economy and made up 17.4% of the U.S. gross domestic product.
CMS statistician Micah Hartman said the 2013 increase is "within the range of the recent low rates of growth in health care spending, between 3.6% and 4.1% from 2009 to 2013," marking the fifth straight year of slow spending growth in the sector (New York Times, 12/3).
Where the Money Goes
An analysis of the report by the Washington Post's "Wonkblog" breaks down the $2.9 trillion in health spending. According to the analysis, the U.S. spent:
- $936.9 billion on hospital care;
- $586.7 billion on physicians and clinical services; and
- $271.1 billion on prescription medications.
Further, the analysis showed that 14% of the total health spending came from costs related to:
- Other health, residential and personal care;
- Home health care;
- Government public health activities; and
- Other medical products.
- 7% of total health spending was on dental and other professional services;
- 7% was on government administration costs and the net costs of health insurance;
- 6% was on investments; and
- 5% was on nursing care facilities and continuing care retirement communities (Millman, "Wonkblog," Washington Post, 12/3).
Reasons for Slow Growth
The report authors noted that lethargic economic growth likely is tied to the slow increases in health spending (Los Angeles Times, 12/3).
According to the New York Times, the slow growth can also be attributed to:
- Automatic, comprehensive cuts in federal spending under a 2011 law;
- Increases in high-deductible health plans, which seem to discourage individuals from seeking care; and
- Recent limits on Medicare reimbursements to hospitals and health maintenance groups.
The report also noted that Affordable Care Act provisions to help identify "unreasonable increases in premiums" and requirements that insurers use at least 80% of their premium revenues on care and quality initiatives also helped to curb spending (New York Times, 12/3). Specifically, premiums grew by 2.8% in 2013, down from by 4% in 2012 (The Hill, 12/3). In addition, less use of outpatient and inpatient hospital services and increased cost-sharing helped to keep spending in check.
Conversely, slowdowns in spending by Medicare and private health plans were offset by increases in Medicaid spending, the report said (New York Times, 12/3). The report noted that Medicaid spending increased by 6.1% last year, to $449.4 billion, accounting for 15% of total health spending (The Hill, 12/3). According to the New York Times, the Medicaid figures do not include significant expansions of the program under the ACA, which took effect this year.
ACA and Long-Term Spending Slowdown
The report authors noted that while some ACA provisions "exerted downward pressure" on health spending, other parts of the law "exerted upward pressure." However, the report continued, "The key question is whether health spending growth will accelerate once economic conditions improve significantly," and "[h]istorical evidence suggests that it will" (New York Times, 12/3).
Hartman added, "The most prominent provisions of the [ACA] were implemented in 2014 and will be discussed in our historical report next year" (The Hill, 12/3).
Still, the report noted that "at the same time, there have been and will continue to be forces that keep medical price growth low, particularly for Medicare" (Baker, National Journal, 12/3).
Admin Officials Tout ACA
CMS Administrator Marilyn Tavenner in a statement said, "This report is another piece of evidence that our efforts to reform the health care delivery system are working."
Jason Furman, chair of the president's Council of Economic Advisers, in a blog post wrote that the ACA "made a meaningful contribution to recent trends by introducing payment reforms in Medicare and other public programs." He added, "These reforms ... are generating significant savings in Medicare and, if recent research results are correct, catalyzing changes in the private sector that are generating additional savings" (The Hill, 12/3).
This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.