Growth in health care spending remains at record low in 2011

McClatchy NewspapersJanuary 7, 2013 

— Total U.S. health care spending hit $2.7 trillion in 2011, making for a three-year run of record-low annual spending growth after the onset of the Great Recession.

The roughly 3.9 percent increase in public and private health expenditures for 2011 was nearly identical to the rates of growth in 2009 and 2010. They represent the three lowest annual growth rates in the 52 years the data has been kept, according to a report Monday by the U.S. Department of Health and Human Services.

The slower growth resulted from a mix of trends, including a decline in federal public-health spending and slower growth in private health insurance premiums – 3.8 percent.

These trends offset an increase in 2011 in the use of personal health-care goods and services as the economy continued to rebound and private health-insurance enrollment stabilized after three years of major declines, said Micah Hartman, a federal statistician who co-authored the report.

In fact, spending for physician and clinical services rose 4.3 percent in 2011, up from a 3.1 percent increase in 2010 as the use and intensity of services increased.

The Affordable Care Act, which critics refer to as “Obamacare,” had a minimal effect on health spending in 2011 because its main provisions – mandatory coverage and state health-insurance exchanges – don’t take effect until 2014, Hartman said.

Overall, spending for medical care reached $2.7 trillion, or roughly $8,680 per person in 2011, up from $2.6 trillion, or $8,417 per person, in 2010. The share of the economy devoted to health care in 2011 remained stable, at 17.9 percent of gross domestic product, the same as in 2010 and 2009.

The period of slower growth in health spending has been fueled mainly by the loss of job-based health coverage in the economic downturn.

From 2007 to 2010, private health-insurance enrollment fell by 11.2 million customers, and the number of uninsured increased by 7 million. In 2009 alone, 6.2 million people lost private health coverage, the largest one-year decline on record. Numerous studies have shown that people seek less medical care when they have no insurance.

Three years of uniform growth rates hide the fact that certain areas of medical spending grew while others declined. For instance, prescription drug spending increased nearly 3 percent in 2011, compared with a 0.4 percent increase in 2010, as prices rose for brand-name and costly specialty drugs that treat rare and complex conditions.

Spending for Medicare, which accounted for 21 percent of U.S. health spending in 2011, reached $554 billion that year. That’s a 6.2 percent increase over 2010, which saw a 4.3 percent spending hike from 2009. Medicare’s 2011 spending increase was due mainly to a one-time increase in nursing home payments, faster growth in spending for doctors’ services and higher spending for Medicare Advantage, the private health plans that provide Medicare benefits.

Spending on Medicaid, the federal health insurance program for the poor, slowed in 2011, increasing by only 2.5 percent, to nearly $408 billion. This resulted from states cutting programs as some federal Medicaid funding expired. In 2010, Medicaid spending rose nearly 6 percent.

While the federal health overhaul didn’t play a prominent role in the growth rate, a provision of the law that allows parents to include children up to age 26 on their insurance plans did affect spending. Because the 2.7 million young adults who gained coverage under the provision are typically healthier, their enrollment helped temper the average per-enrollee cost of job-based insurance.

The federal health-care program also requires rebates from drug companies on prescription medications used by Medicaid enrollees. These rebates helped slow the growth in Medicaid prescription-drug spending in 2011.

In an afternoon blog post, Health and Human Services Secretary Kathleen Sebelius said the “rate review” provision of the health care law – which requires insurers to justify premium hikes of 10 percent or more – had helped save U.S. consumers an estimated $1 billion in premium increases.

Other highlights from the report:

– Out-of-pocket spending increased 2.8 percent in 2011, mainly because of higher cost-sharing and increased enrollment in consumer-directed health plans that typically have higher deductibles and co-pays.

– Spending growth for hospital care slowed by nearly 5 percent in 2011 as hospital cost increases, Medicaid spending for hospital care and utilization of hospital services all slowed.

– Per capita personal health-care spending increased 3.3 percent in 2011, up 0.4 percent from 2010.

Email: tpugh@mcclatchydc.com; Twitter: @TonyPughDC

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