Health spending growth hit 53-year low in 2013

U.S. healthcare spending grew more slowly last year than at any time in the past half century as Medicare squeezed outlays, millions of Americans continued to go without health insurance, and insured people spent at a slower pace, CMS actuaries said last week.

The nation spent $2.9 trillion on healthcare last year, an increase of 3.6% from the prior year and the smallest increase since 1960, according to the revised federal estimate published in Health Affairs. U.S. health spending growth fell below 4% in 2009 with the Great Recession that stripped private health insurance from millions of individuals. But newly revised numbers show an acceleration in 2012 to 4.1% before a spending slowdown last year.

Some analysts predict spending growth now will tick upward given the healthcare reform law’s coverage expansion that started in January 2014. Indicators of spending so far this year are mixed, however. Major hospital chains have reported fewer uninsured and healthier margins, particularly in states that expanded Medicaid. But quarterly national estimates still put health spending growth below 4%.

As a percentage of the economy, health spending last year remained at 17.4% of the gross domestic product. The slow growth can be traced to the recession, the growth of highdeductible health plans that curb medical utilization, and cost-control provisions of the Patient Protection and Affordable Care Act, according to the federal report.

Commercial health plan enrollment barely rebounded last year from the recession, growing 0.7%. Slower growth in private insurance spending, driven in part by the increase in highdeductible plans, contributed to sluggish health-spending growth in 2013, said Micah Hartman, a CMS statistician who worked on the new federal estimate. High-deductible plans are 9% to 12% less costly than preferred provider plans, shifting more costs to consumers.

Medicare spending cuts contained in the Affordable Care Act helped slow Medicare spending growth, as did the smaller number of baby boomers entering the program after an enrollment rush in 2012. Medicare spending increased less rapidly in 2013, rising 3.4%, compared with 4% the prior year. The Affordable Care Act cuts, which reduce rate increases to providers, began in 2011 and continue through 2019. In addition, the budget sequestration cuts reduced what Medicare pays hospitals, doctors and other providers by 2%.