Health Care Spending Growth Continues to Slow

U.S. health spending grew more slowly last year that at any time in the last 53 years, according to new data from the Office of the Actuary (OACT) at the Centers for Medicare & Medicaid Services (CMS).

Health spending grew at 3.6% and total national health expenditures in the United States reached $2.9 trillion, or $9,255 per person in 2013, and follows a pattern of slow growth, between 3.6% and 4.1% for five consecutive years, data show.

The recent low rates of national health spending growth coincide with modest growth in Gross Domestic Product (GDP), which averaged 3.9% per year since the end of the severe economic recession in 2010. As a result, the share of the economy devoted to health remained unchanged over this period at 17.4%, data show.

“This report is another piece of evidence that our efforts to reform the health care delivery system are working,” says CMS Administrator Marilyn Tavenner in a statement. “To keep this momentum going, we are continuing our efforts to shift toward paying for care in ways that reward providers who achieve better outcomes and lower costs.”

Recently, CMS proposed a new rule that update and improve policies governing the Medicare Shared Savings Program (Shared Savings Program) as part of the agency’s effort to improve incentives to participate in Accountable Care Organizations (ACOs).

The new data also shows that national health spending slowed from 4.1% growth in 2012 to 3.6% in 2013. The report attributes the 0.5 percentage point slowdown in health care spending growth to slower growth in private health insurance, Medicare, and investment in medical structures and equipment spending. However, faster growth in Medicaid spending, due to Medicaid expansion, helped to partially offset the slowdown, CMS says.

Medicare spending, which represented 20% of national health spending in 2013, grew 3.4% to $585.7 billion, a slowdown from growth of 4% in 2012.

“This slowdown was primarily caused by a deceleration in Medicare enrollment growth, as well as net impacts from the Affordable Care Act and sequestration,” CMS says, adding that per-enrollee Medicare spending grew at about the same rate as 2012, increasing just .2% in 2013.

Some of the Affordable Care Act provisions that exerted upward pressure in 2013 included early Medicaid expansion initiatives, a temporary increase in Medicaid primary care provider payments, and the implementation of prescription drug industry fees.

Medicaid spending grew 6.1% in 2013 to $449.4 billion, an acceleration from 4% growth in 2012.

“Faster Medicaid growth in 2013 was driven in part by increases in provider reimbursement rates and some states’ expanding benefits,” CMS says.

In addition, spending on private health insurance premiums — a 33% share of total health care spending — reached $961.7 billion in 2013, and increased 2.8%, slower than the 4% growth in 2012.

“The slower rate of growth reflected low enrollment growth in private health insurance plans, the continued shift of enrollees to high-deductible health plans and other benefit design changes, low underlying medical benefit trends, and the impacts of the Affordable Care Act,” CMS says.

Direct consumer payments such as copayments, deductibles, spending by the insured on services not covered by insurance, spending by those without health insurance and other out-of-pocket payments grew 3.2% in 2013 to $339.4 billion, slightly slower than annual growth of 3.6% in both 2011 and 2012.

“Among health care goods and services, slower growth in spending for hospital care and physician and clinical services contributed to slower growth in national health care spending in 2013,” CMS says, adding that faster spending growth for retail prescription drugs in 2013 partially offset the overall slowdown.

Hospital spending increased 4.3% to $936.9 billion in 2013 compared to 5.7% growth in 2012. And growth in private health insurance and Medicare hospital spending decelerated in 2013 compared to 2012.

Spending for physician and clinical services increased 3.8% in 2013 to $586.7 billion, from 4.5 percent growth in 2012. Slower price growth in 2013 was the main cause of the slowdown, as prices grew less than 0.1 percent. Growth in spending from private health insurance and Medicare, the two largest payers of physician and clinical services, experienced slower spending growth in 2013, while Medicaid growth accelerated as a result of temporary increases in payments to primary care physicians.

Bucking the slow spending growth trend was retail prescription drug spending, which accelerated in 2013.

Retail prescription drug spending grew 2.5% to $271.1 billion in 2013, compared to .5% growth in 2012.

Faster growth in 2013 resulted from price increases for brand-name and specialty drugs, increased spending on new medicines, and increased utilization, notes CMS.

In 2013, households accounted for the largest share of spending at 28%, followed by the federal government at 26%, private businesses at 21%, and state and local governments at 17%, data show.

Since 2010, the share of health spending financed by the federal government decreased—from 28% to 26% in 2013. At the same time, the share financed by state and local governments increased—from 16% in 2010 to 17% in 2013.

“These shifts resulted primarily from the June 2011 expiration of additional Medicaid funding provided by the federal government to the states through the American Recovery and Reinvestment Act of 2009,” CMS says.

Access the recent findings here.

Written by Cassandra Dowell

Cassandra Dowell