The Recession, Not Obamacare, Is Slowing Health Spending

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

National Journal
Clara Ritger
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Clara Ritger
Jan. 6, 2014, 11:09 a.m.

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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