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Growth of national health expenditures, 2011

National Health Spending In 2011: Overall Growth Remains Low, But Some Payers And Services Show Signs Of Acceleration

By Micah Hartman, Anne B. Martin, Joseph Benson, Aaron Catlin, the National Health Expenditure Accounts Team
Health Affairs, January 2013

Abstract

In 2011 US health care spending grew 3.9 percent to reach $2.7 trillion, marking the third consecutive year of relatively slow growth. Growth in national health spending closely tracked growth in nominal gross domestic product (GDP) in 2010 and 2011, and health spending as a share of GDP remained stable from 2009 through 2011, at 17.9 percent. Even as growth in spending at the national level has remained stable, personal health care spending growth accelerated in 2011 (from 3.7 percent to 4.1 percent), in part because of faster growth in spending for prescription drugs and physician and clinical services. There were also divergent trends in spending growth in 2011 depending on the payment source: Medicaid spending growth slowed, while growth in Medicare, private health insurance, and out-of-pocket spending accelerated. Overall, there was relatively slow growth in incomes, jobs, and GDP in 2011, which raises questions about whether US health care spending will rebound over the next few years as it typically has after past economic downturns.

Out-Of-Pocket Spending

Faster growth in 2011 reflects higher cost sharing for group health insurance plans and increased enrollment in consumer-directed health plans that have higher deductibles, copayments, or both. Additionally, increases in the number of uninsured people over the past few years had resulted in more direct out-of-pocket spending than might otherwise have been the case.

Medicaid

Slower growth in Medicaid spending reflected states’ efforts to control expenditure growth as the enhanced federal matching rates expired and state revenues continued to increase at a slow rate. With fewer federal matching dollars and continued pressure on their budgets, some states implemented cost-control measures that included provider reimbursement reductions, eligibility restrictions, benefit reductions, and increased cost sharing.

Medicare

Medicare spending for physicians’ services also accelerated in 2011, increasing 7.6 percent compared to 3.2 percent growth in 2010, even as the increase in physicians’ fees was lower in 2011. Faster fee-for-service spending growth for physician services, therefore, is attributable to a rebound in the volume and intensity of services after unusually slow growth in 2009 and 2010.

Conclusion

In 2011 national health spending increased 3.9 percent—the same rate of growth experienced in 2009 and 2010. The recent recession had an immediate and noticeable effect on the health sector because of high unemployment, loss of private health insurance coverage, and a reduction in the resources available to pay for health care. All of these factors contributed to historically low growth in aggregate health spending during 2009–11.

In 2011, however, there were some signs of change, evident in faster growth in nonprice factors such as the use and intensity of health care goods and services. Additionally, insurance coverage expanded in 2011 for dependents under age twenty-six, and overall private health insurance coverage did not decline as had been experienced in the prior three years.

Nonetheless, economic, income, and job growth in 2011 was modest and less than might normally be expected during an economic recovery. This fact raises questions about whether the near future will hold the type of rebound in health care spending typically seen a few years after a downturn. Data for the years 2012 and 2013 will provide important indications of the state of the US health system as the major insurance expansions associated with the Affordable Care Act grow nearer on the horizon.

http://content.healthaffairs.org/content/32/1/87.abstract

Comment:

By Don McCanne, MD 

National Health Expenditures (NHE), 2011

$2,700.7 - NHE, billions

17.9 - NHE as percent of GDP

$8,680 - NHE per capita

In 2011, health care costs grew at the same rate as the growth in the gross domestic product (GDP). Thus the recent severe recession and slow recovery, plus the initial phase of implementation of the Affordable Care Act, have not had a major impact on the growth of health care spending.

At a time when Medicare spending is under close scrutiny, especially for potential opportunities to reduce the federal deficit, the fact that the volume and intensity of services have increased disproportionately warrants scrutiny. Physician behavior may drive reforms that could have other consequences, favorable, or more likely unfavorable.

Shifts in Medicaid spending should raise red flags. More of the costs are being shifted to states at a time that they are facing budget crises. States are responding with measures such as provider reimbursement reductions, eligibility restrictions, benefit reductions, and increased cost sharing. These changes can result in greater impairment of access just at a time when massive enrollment increases are anticipated. This can have very serious consequences for a welfare program that is already critically underfunded.

Out-of-pocket spending is increasing, especially due to an increase in enrollment in consumer-directed health plans with high deductibles - a market strategy to reduce health care spending by erecting financial barriers to care.

Although reducing the increase in health expenditures down to the rate of increase in the GDP sounds like good news, the trends behind the numbers should have us all deeply concerned.

Need I say, a single payer...