HEALTH SPENDING SLOW TO GROW

DJ Wilson | Jan 17, 2012 |

Recently, a report came out which revealed that health care spending growth had its two slowest rates in 2009 and 2010 than ever reported (3.8% and 3.9% respectively) – while health care as a share of the GDP stayed at 17.9% in 2010.

A few interesting tidbits from the report:

— Spending on private health insurance has slowed considerably in recent years, with fewer Americans enrolling in private health plans while growth in premiums surpassed growth in benefits in 2010.

— Hospital services continue to outpace other areas of health spending (and costs). While hospital spending slowed to 4.9% growth (still more than other spending areas), Medicaid spending on hospital services grew 11.2% in 2010.

— The federal government picked up more of the tab in 2010, due in part to taking on a higher share of Medicaid costs from the states as a part of the 2009 stimulus package.  The federal share of health care spending grew to 29% in 2010, up from 23% in 2007.

What are the reasons for the slow growth in health spending?  A lower rate of medical inflation for one – we’re used to hearing about how much medical inflation outpaces overall price growth, but lately that hasn’t been the case.

CMS attributes it to the recession and lower use of services.  Unemployment has definitely affected use of services – with 2010’s high rate of unemployment, employer health coverage decreased (contributing to a drop in private health insurance enrollment for the third year in a row), keeping many Americans out of the doctor’s office.

What about health reform?  2010 marked the first year of the implementation of the Affordable Care Act, and some have wondered if it had an impact on health care costs and spending.  All indicators are saying this is not the case yet – CMS says that the Affordable Care Act contributed 0.1% to the 3.9% growth in spending.  Although, it’s reasonable to point out that the meat of the Affordable Care Act has yet to take effect, as most of the major expenditures won’t take effect until 2014, which will certainly increase overall health spending.