CMS Analysis Finds Health Care Spending Slowdown Continues
The nation's health care spending increased by 3.7%, to $2.8 trillion, in 2012, marking the fourth consecutive year that spending growth was at a near-record low, according to a federal analysis released Monday, Reuters reports.
The report -- compiled by economists at CMS' Office of the Actuary -- also showed that health spending as a percentage of the economy declined slightly, from 17.3% in 2011 to 17.2% in 2012, with the cost of medical care averaging $8,915 per person. In 2011, the average cost of medical care was $8,658 and the spending growth stood at 3.6% (Humer, Reuters, 1/6).
According to co-author Aaron Catlin, a deputy director of the CMS National Health Statistics Group, 1997 was the last time on record that a decline had been found in health spending as a share of the gross domestic product, Modern Healthcare reports (Evans, Modern Healthcare, 1/6).
Possible Factors for Slowdown
The report's authors attributed the slowdown to several possible factors, including greater availability of lower cost generic prescription drugs as several brand-name blockbuster drugs -- such as Lipitor, Plavix and Singulair -- lost patent protection in late 2011 and early 2012. According to the analysis, 77% of all prescriptions filled in 2012 cost $10 or less per prescription, an increase of about 7% from the previous year.
Meanwhile, the report also highlighted a deceleration in total spending on nursing home care and prescription drugs, which grew by just four-tenths of a percentage point in 2012 to $263 billion, compared with a 2.5% increase in 2011, the New York Times reports (Pear, New York Times, 1/6).
According to Modern Healthcare, the overall slow growth "masked" an increase in spending on hospital and physician care in 2012, which rose at a faster rate from the previous year. Specifically, spending on hospital care increased from 3.5% in 2011 to 4.9% in 2012, in part because of a higher demand for such care. Although costs for physician care dropped slightly, spending increased to 4% in 2012 from 3.5% in 2011, because of increased demand. Spending for clinical services also increased, from 6.6% in 2011 to 7.1% in 2012 (Modern Healthcare, 1/6).
Medicare, Medicaid Spending Grew Slowly
The report found that Medicare spending increased at a modest rate of 4.8% in 2012 to $573 billion, even though enrollment in the program had its largest single-year increase -- at 4.1% -- in 39 years, CQ HealthBeat reports.
Total Medicare spending per beneficiary increased by 0.7% in 2012, compared with a 2.5% increase in 2011. Spending per beneficiary in the traditional fee-for-service part of Medicare and Medicare Advantage in 2012 also saw small increases of 0.6% and 0.8%, respectively.
The authors noted that the slowdown in spending was largely driven by a 2.2% decline in spending for nursing home care in 2012, which "in turn was driven primarily by a one-time payment reduction to skilled nursing facilities."
Meanwhile, Medicaid spending increased by 3.3% in 2012, up from a 2.4% growth rate in 2011. According to the authors, those rates were "two of the slowest annual rates of growth in the history of Medicaid" (Reichard, CQ HealthBeat, 1/6).
Authors Point to Recession, Say Effect of ACA 'Minimal' on Spending Growth Rate
In a report that explained their analysis, the authors wrote that the Affordable Care Act had a "minimal" effect on overall health care spending, suggesting that there might have been only a 0.1% increase in spending between 2010 when it became law and 2012, the Washington Post's "Wonkblog" reports (Kliff, "Wonkblog," Washington Post, 1/6).
Co-author and CMS economist Anne Martin said her team's analysis concluded that the economic slowdown instead was largely responsible for the slow growth in health spending, according to Modern Healthcare (Modern Healthcare, 1/6).
Catlin added, "The relatively low rates of growth that we've seen over the last four years are consistent with the historical trends that we've seen when we look at health spending and gross domestic product," noting that low growth rates also are "consistent with what we've seen in post-recessionary periods in the past."
However, the authors collectively struck a cautious tone in their report, writing, "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."
White House: Findings a Sign of ACA's Early Success
While the authors placed little emphasis on the ACA's influence, the Obama administration insisted that the report's findings are an indication of the law's early success.
White House Health Policy Coordinator Jeanne Lambrew said, "The years 2009 to 2012 saw the slowest growth in U.S. health care expenditures since the government started collecting this information in the 1960s." She added, "While there is a debate about how much the Affordable Care Act has contributed to this health cost slowdown ... there is no doubt that it reduced Medicare spending growth, and most experts believe that Medicare savings spill over into the private sector" (New York Times, 1/6).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.