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Americans Spend Less on Health Care; Recession to Blame Americans Spend Less on Health Care; Recession to Blame

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Health Care / HEALTH CARE

Americans Spend Less on Health Care; Recession to Blame

Health spending grew at a near record-low rate in 2010, CMS found.(Chet Susslin)

January 9, 2012

Health spending rose at historically low rates for the second year in a row as Americans struggled with unemployment and higher insurance bills, federal government researchers reported on Monday.

Health spending increased by 3.9 percent from 2009 to 2010, the second-lowest rate of growth since the federal government started tracking health-spending data 51 years ago, Centers for Medicare and Medicaid Services researchers reported in the journal Health Affairs. The lowest rate of growth was 3.8 percent in 2009. The data show that the economic recession, which technically ended in 2009, continued to affect health spending well into 2010.

Total health spending in the country, including federal programs like Medicare and Medicaid and private insurance, was $2.6 trillion in 2010, or $8,402 per person.

 

Centers for Medicare and Medicaid officials traced slow growth in health spending to high unemployment and loss of insurance coverage, less income to spend on health care, and higher co-pays that required patients with insurance to pay more out of pocket.  

As people delay care until they have more income or a job, it could mean higher costs down the road, particularly when the 2010 health care law expands access to health insurance to 30 million Americans in 2014.

“Clearly some of this is postponed care, and it’s going to need to be addressed in the future. There’s always a concern that deferred care is going to make someone worse,” Paul Ginsburg, president of the Center for Studying Health System Change and a health economist, said in an interview. “But some medical problems are self-limiting. If you don’t do anything, they get better.”

Health insurance companies saw the largest increase in spending, earning a net 8.4 percent more from insurance premiums in 2010 than 2009. That means insurance premiums collected more money than the insurance companies spent on benefits claimed by enrollees.

“Premiums grew faster than benefits for the first time in seven years, and benefits grew at their slowest rate in the history of the accounts,” Anne Martin, a CMS economist, said on a conference call. Martin said this was because private health insurance companies lost enrollees as people lost jobs, people moved to cheaper health insurance plans, and cost-sharing increased.

Most of the 3.9 percent increase in health spending stemmed from higher medical prices, not from people visting doctors or hospitals more frequently. That compares to 2007-2009, when increased health care activity counted for nearly half of the hike in health spending.

Other findings:

  • Household health care spending equaled $725.5 billion in 2010 and represented 28 percent of total health spending, slightly lower than its 29 percent share in 2007.
  • Retail prescription-drug spending made up 10 percent of total health care spending and grew 1.2 percent to $259.1 billion in 2010, down from 5.1 percent growth in 2009.
  • The federal government financed 29 percent of the nation’s health care spending in 2010, up from 23 percent in 2007, for a total of $742.7 billion. 
  • Medicare spending grew 5 percent in 2010, down from 7 percent in 2009. 
  • Spending on physician and clinical-services spending, which accounted for 20 percent of total health care spending, grew 2.5 percent to reach $515.5 billion in 2010, slowing from 3.3 percent growth in 2009.

The Obama administration welcomed the report as good news for the health care law, but researchers found the law had a less than 0.1 percent effect on national health spending in 2010.

“These numbers do not take into account all of the cost-saving provisions in the Affordable Care Act that are still being implemented. But they do show why the Affordable Care Act is so important,” senior White House adviser Nancy-Ann DeParle wrote on the White House blog. DeParle said the insurance regulations in the law would keep insurance companies “in check.”

“The data released today also show that Medicare is more effective at containing costs than private health plans—it continues to have a lower growth in costs per enrollee. The data should give pause to anyone who thinks that giving vouchers to seniors to buy private plans is a good idea,” Topher Spiro, Managing Director for Health Policy at the left-leaning Center for American Progress said in a statement.

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