Latest Snapshot of National Health Spending

Health care spending in the United States rose 3.9 percent in 2011 to a total of $2.7 trillion and accounted for 17.9 percent of the gross domestic product (GDP), according to the annual report that the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) released Jan. 7. This was the same growth rate and GDP percentage as in the previous two years and marks the lowest in the report’s 52-year history. It reflects continued economic weakness that has depressed demand for health care services and increased the ranks of the uninsured, said the report, published in the January 2013 issue of Health Affairs. “Although the health sector tends to be somewhat insulated from overall recessions, this one had an immediate effect on health care spending,” CMS noted. “High levels of unemployment, a considerable reduction in the number of people with private health insurance, lower household income and assets, and financial uncertainty all had a substantial impact on consumers, providers, and sponsors of health care.” 2011 Trends in Spending Growth

• Medicare: 6.2 percent versus 4.3 percent in 2010, due in large part to a one-time change in payment rates to skilled nursing facilities and faster growth in spending for physician services under fee-for-service and for Medicare Advantage plans.
• Medicaid: 2.5 percent versus 5.9 percent the previous year, attributed to tight state budgets, an end to enhanced federal aid to states, and slower enrollment growth (from 4.9 percent in 2010 to 3.1 percent in 2011).

• Physician and clinical services: Up faster in 2011 than in 2010, 4.3 percent versus 3.1 percent, due mainly to factors not linked to price, such as the use and complexity or intensity of services.

• Hospital services: Up 4.3 percent in 2011, but below spending growth of 4.9 percent in 2010, because of slower growth in hospital prices, lower growth in the use of hospital services, and less Medicaid spending on hospital care. The number of inpatient hospital days fell by 1.1 percent in 2011, following a decline of 1.6 percent in 2010. Outpatient hospital visits were up only slightly in 2011.

• Prescription drug spending: Up 2.9 percent for a total of $263 billion, compared with a rise of 0.4 percent the previous year. The accelerated pace was attributed in part to price increases for brand-name and specialty drugs, though this was moderated somewhat by fewer prescriptions dispensed and an increased use of generics.

• Private health insurance: 3.8 percent versus 3.4 percent in 2010, mostly due to an increase in enrollment in private plans of 0.5 percent.

• Out-of-pocket spending by individuals: 2.8 percent versus 2.1 percent the previous year, due to higher cost-sharing limits and more people enrolled in consumer directed health plans, which often require large deductibles.

• Personal health care goods and services: 4.1 percent versus 3.7 percent in 2010.

The report found that the health care reform law has yet to make a big impact on the health care system because most of its major provisions will not be implemented until 2014. But the law has had some impact on some components of national health care spending, CMS noted. “As many as 2.7 million people age 26 and younger had been added to their parents’ health plans by 2011 and Medicaid prescription drug rebates have helped lower the growth in Medicaid prescription drug costs.”