Health Care Spending Increased by 3.9% in 2011, CMS Analysis Finds

U.S. health care spending grew by 3.9% in 2011, according to a CMS analysis published Monday in the journal Health Affairs, Reuters reports (Morgan, Reuters, 1/7).

It is the third consecutive year in which health care spending grew by 3.9%, which is the lowest annual rate in the 52 years federal officials have been compiling such data.

Key Findings

The report noted that in 2011, the growth in health spending roughly matched overall economic growth and that health spending accounted for 17.9% of gross domestic product, where it has been since 2009 (Pear, New York Times, 1/7).

Overall, CMS found that health expenditures in 2011 totaled $2.7 trillion, or $8,680 per person (Pugh, McClatchy/Sacramento Bee, 1/8).

Spending for private insurance premiums increased by 3.8%, while out-of-pocket spending increased by 2.8%, up from 2.1% in 2010.

The report also found that spending for physicians' services increased by 3.6%, to $436 billion, and prescription drug spending rose by 2.9%, reaching $263 billion in 2011. CMS attributed the increases in prescription drug spending to the growth of costly specialty drugs, typically used to treat chronic conditions. CMS also noted that spending on new brand-name drugs more than doubled between 2010 and 2011 (New York Times, 1/7).

According to CMS, the federal government's share of health care spending increased from 23% in 2010 to 28% in 2011, in part because of a 6.2% rise in Medicare spending from an increase in doctor visits and a one-time change in payments to skilled nursing homes (Reuters, 1/7).

Meanwhile, hospital spending increased by 4.3% in 2011, compared with 4.9% in 2010 and 6.7% in 2009 (Radnofsky, Wall Street Journal, 1/7). Medicaid spending increased by 2.5% in 2011 -- down by more than half -- as more individuals became employed and states moved to curb costs.

Questions About Future Growth Rate

The analysis indicated that the slower health care spending growth rate might not last, as the economy recovers from recession, Reuters reports (Reuters, 1/7).

Federal officials noted that it was unclear whether the low growth rate was the start of a downward trend or demonstrated continuing effects of the recession (New York Times, 1/7). The analysis showed significant increases in spending for treatment, as opposed to spending on administration and insurance premiums, signaling that the slower growth rate is not permanent (Wall Street Journal, 1/7).

The researchers said the analysis casts doubt over future spending growth estimates, noting that economic, income and job growth rates in 2011 were lower than expected during an economic recovery.

The Obama administration has estimated that health care spending will grow by 7.4% in 2014, to represent 18.2% of GDP, as more U.S. residents gain health coverage through the health insurance exchanges and the Medicaid expansion under the Affordable Care Act.

The authors of the CMS report also noted that the ACA is expected to help lower spending growth later in the decade (Reuters, 1/7).

Obama Administration Touts ACA Provisions

HHS Secretary Kathleen Sebelius credited parts of the law, such as its rate-review provisions, for contributing to the lower growth rate, the The Hill's "Healthwatch" reports.

In a statement, Sebelius said, "A number of provisions in the health care law that will help control costs and spending are still being implemented, but the statistics show how the [ACA] is already making a difference" (Baker, "Healthwatch," The Hill, 1/7).

However, the report showed that the ACA had "no discernible impact" on overall health spending (New York Times, 1/7).