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The Recession, Not Obamacare, Is Slowing Health Spending The Recession, Not Obamacare, Is Slowing Health Spending

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The Recession, Not Obamacare, Is Slowing Health Spending

Federal report finds health spending continued its slow climb in 2012.

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National health care spending decreased slightly as a share of the economy in 2012 due to higher growth in the U.S. gross domestic product. But use of health care services—including hospital care—was on the rise.(Shutterstock)

Growth in national health spending remained low for the fourth consecutive year, an annual federal report says.

Health care spending increased 3.7 percent in 2012 to $2.8 trillion, according to an analysis released Monday by the Office of the Actuary at the Centers for Medicare and Medicaid Services, marking the fourth consecutive year of the slowest rates recorded in the 53-year history of the National Health Expenditure Accounts.

 

Growth has slowed since 2009. In 2007, health care spending rose 6.3 percent. But since 2009 that growth rate has held between 3.6 and 3.8 percent.

While some researchers and economists have pointed to the Affordable Care Act, which was signed into law in March of 2010, as a reason for the slow in health care spending, the economists at CMS were not quick to credit the president's legacy health initiative.

"We spent as much as 0.1 percent more on health care between 2010 and 2012 due to the Affordable Care Act," said CMS economist Anne Martin, the primary author of the study that was released in the January issue of Health Affairs.

 

The Affordable Care Act added roughly $5 billion to health care spending between 2010 and 2012, CMS said. With national health care spending topping $8 trillion, that total represents just a fraction of overall costs.

While the key components of the health law won't have a significant role in spending totals until the 2014 data are released, some provisions implemented soon after the law's passage did affect the 2012 numbers, including increased Medicaid rebates for prescription drugs, drug discounts for Medicare beneficiaries, coverage for dependents until age 26, and the provision which requires insurance companies to spend at least 80 percent of premiums on medical care.

CMS pointed to the recession as the reason for modest growth in health care spending. Both the 1990 and 2001 recessions were followed by "periods of stability," the economists said.

"We have no evidence that cycle has been broken," Martin said.

 

Despite the numbers following the historical trend line, there were a number of one-time factors that contributed to the low spending growth in 2012. Skilled nursing facilities saw a Medicare pay cut to make up for higher pay in previous years and patents expired for a large number of prescription drugs, allowing access to and use of less-expensive generics. Those areas saw 1.6 percent and 0.4 percent growth, respectively, compared with 4.3 percent and 2.5 percent growth in 2011.

Higher use and cost of services resulted in higher personal health care spending in 2012. Personal health care spending increased to 3.9 percent in 2012 and accounts for 85 percent of national spending totals. 2012 saw an uptick in the number of office visits and overall use of physician and clinical services, which amounted to a 4.6 percent spending increase, compared with years immediately following the recession. Increased cost and use of hospital care resulted in a 1.5 percent jump from 2011 to 2012, a growth of 4.9 percent.

Because some states opted to expand access to Medicaid services before the widespread Affordable Care Act expansion, Medicaid spending accelerated to 3.3 percent in 2012 from 2.4 percent growth in 2011. Medicare growth, however, slowed to 4.8 percent from 5 percent the previous year, due to the skilled nursing facility pay cut.

Low growth in spending on private health insurance premiums in 2012—a 3.2 percent increase—was due to continued shifts to high-deductible health plans (which carry low premiums and high cost sharing) as well as decreased enrollment in private health insurance plans due to the recession.

The gross domestic product surpassed health care spending at a rate of 4.6 percent, making health care a smaller share of the economy in 2012 than in previous years, falling to 17.2 percent from 17.3 percent in 2011. The last time health spending declined with respect to the GDP was 1997, although economists at the Centers for Medicare and Medicaid Services said 2011 and 2012 both marked minor declines. In 1997, health care spending fell to 13.3 percent from 13.4 percent in 1996, due primarily to the Balanced Budget Act, which mandated large reductions in federal Medicare and Medicaid spending, CMS officials said.

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