U.S. healthcare rate of growth at 53-year low

Jan. 7, 2014 at 12:51 AM
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BETHESDA, Md., Jan. 7 (UPI) -- Total U.S. healthcare spending in 2012 increased by 3.7 percent -- 0.4 percentage points higher than in 2011 -- the lowest rate since 1960, U.S. officials say.

An analysis by the Office of the Actuary at the Centers for Medicare and Medicaid Services -- part of the U.S. Department of Health and Human Services -- estimated U.S. healthcare spending grew at a rate of 3.7 percent in 2012 to $2.8 trillion.

The level of annual growth is similar to spending growth rates since 2009, which ranged from 3.6 percent to 3.8 percent annually.

The study, published in the journal Health Affairs, said total healthcare spending in 2012 grew more slowly than the gross domestic product, or the share of the economy devoted to healthcare fell slightly from its 2011 level of 17.3 percent to 17.2 percent in 2012. In the United States, the share of GDP devoted to healthcare spending grew from 9 percent of GDP in 1980 to 16 percent of GDP in 2008.

Lead author Anne B. Martin, an economist in the Office of the Actuary at CMS, said the growth of healthcare spending during all four years was at the slowest rates ever recorded in the 53-year history of the National Health Expenditure Accounts.

"The low rates of national health spending growth and relative stability since 2009 primarily reflect the lagged impacts of the recent severe economic recession," Martin said in a statement. "Additionally, 2012 was impacted by the mostly one-time effects of a large number of blockbuster prescription drugs losing patent protection and a Medicare payment reduction to skilled nursing facilities."

Spending growth accelerated in 2012 from 2011 included:

-- Hospital spending, 4.9 percent -- reached $882.3 billion in 2012 -- an increase from the 1.5 percent growth rate the year before.

-- Physician and clinical services grew 4.6 percent up from 4.1 percent in 2011.

-- Medicaid expenditures at 3.3 percent growth increased from 2.4 percent in 2011 to reach $421.2 billion in 2012. These were the two slowest annual rates of growth in the history of Medicaid.

-- Out-of-pocket spending at 3.8 percent growth increased faster in 2012 compared to 2011, when growth was 3.5 percent.

Major areas where spending growth slowed from 2011 included:

-- Retail prescription drugs dropped 0.4 percent from 2.5 percent in 2011 to reach $263.3 billion in 2012.

-- Nursing care facilities and continuing care retirement communities declined 1.6 percent.

-- Private health insurance grew 3.2 percent compared to 3.4 percent growth in 2011 was mainly due to low growth in enrollment in 2012, which remained 9.4 million enrollees fewer in 2012 than in 2007.

-- Medicare spending grew 4.8 percent slowed slightly compared to 5 percent growth in 2011 to reach $572.5 billion in 2012. Growth in fee-for-service expenditures, which accounted for nearly three-quarters of total Medicare spending, slowed from 4.3 percent in 2011 to 2.7 percent in 2012. However, Medicare Advantage spending accounted for the remainder, increasing 10.9 percent in 2012 compared to 7 percent growth in 2011.

Healthcare policy experts said the drop in the growth of healthcare spending was due mainly to the recession because the millions who lost jobs also lost health insurance and even those with jobs and health insurance put off treatment for some health problems until economic times were better.

However, several aspects of the Affordable Care Act are already in practice and it too is having an impact.

Jeanne Lambrew, a White House deputy assistant for health policy, posted a blog attributing the slower growth in healthcare spending to the impact of the Affordable Care Act.

"For years, healthcare costs in America skyrocketed, with brutal consequences for our country," she wrote. "The Affordable Care Act, for the first time in decades, has helped to stop that trend."

The White House acknowledged a slow economy has played a role in keeping cost growth low, but it argued the trend persisted in part because of Obamacare as the economy improved, the Hill reported.

Republicans immediately challenged this assertion and pointed to a section of the CMS report that described the law's impact on the healthcare spending slowdown as small.

"Although the Affordable Care Act had a minimal impact on aggregate health spending through 2012, several provisions continued to affect certain sub-components of national health expenditures, such as increased Medicaid rebates for prescription drugs, the Medicare drug coverage gap -- "doughnut hole" -- discount program, coverage for dependents under age 26 and the minimum medical loss ratio provision, which requires insurers to spend a minimum percentage of premium revenue on medical claims and healthcare quality improvements not bonuses or overhead, the report said.

"No matter how much bluster the White House puts behind these findings, the actuaries continue to show that Obamacare's impact on slower growth is negligible. To suggest otherwise is nonsense," Speaker John Boehner, R-Ohio, spokesman Brendan Buck said.

In response to the CMS report, Republican critics argued the law will eventually accelerate healthcare cost growth by imposing taxes and adding people to insurance rolls.

Supporters said the opposite, noting that parts of healthcare reform are designed to lower spending in both private and public health insurance. Supporters also pointed out that there have been recessions before and while the healthcare growth rate slowed, the recent numbers are at historic lows.

The White House said policies meant to lower costs in Medicare -- reducing avoidable hospital re-admissions, for example -- are also having a positive impact in the private sector.

Still, it could prove difficult to convince the public that healthcare spending is slowing when many people are facing plans with higher out-of-pocket costs. In the last decade, insurance companies have increased the patient's share of paying for healthcare treatment dramatically with higher deductibles, higher co-pays and higher co-insurance.

The United States spends more on healthcare than any other country -- more than 2.5 times more per capita than the second highest spending country.

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