National Health Spending Growth Remains Low For Fourth Consecutive Year

Abstract

A new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS), released today in the January 2014 issue of Health Affairs, estimates that health care spending in the United States grew at a rate of 3.7 percent in 2012 to $2.8 trillion. That level of annual growth is similar to spending growth rates since 2009, which increased between 3.6 percent and 3.8 percent annually. This means that growth during all four years has occurred at the slowest rates ever recorded in the fifty-three-year history of the National Health Expenditure Accounts. Total health care spending in 2012 grew more slowly than did the gross domestic product (GDP), which means that the share of the economy devoted to health care fell slightly from its 2011 level of 17.3 percent to 17.2 percent in 2012 (these shares reflect a large upward revision to the GDP in July 2013 that caused a corresponding downward revision to the health spending proportion of GDP). Faster growth among some services was partially offset by slower growth in other areas, said Anne B. Martin, an economist in the Office of the Actuary at CMS and lead author of the Health Affairs article. “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. “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.” Personal health care spending (health care goods and services), which accounted for 85 percent of total national health spending, increased by 3.9 percent in 2012, 0.4 percentage points faster than in 2011. This uptick in growth was influenced primarily by faster growth in hospital and physician and clinical services. Partially offsetting this acceleration was slower growth in spending for prescription drugs and nursing home care. Spending growth trends among health care payers varied as well in 2012. Medicaid and out-of-pocket spending grew faster in 2012 than in 2011, but growth in private health insurance and Medicare spending was slightly slower. Although the Affordable Care Act had a minimal impact on aggregate health spending through 2012, several provisions continued to affect certain subcomponents of national health expenditures, such as increased Medicaid rebates for prescription drugs, the Medicare drug coverage gap (“donut hole”) discount program, coverage for dependents under age twenty-six, and the minimum medical loss ratio provision (which requires insurers to spend a minimum percentage of premium revenue on medical claims and health care quality improvements).