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2011 healthcare spending growth at 52-year low

An analysis by the Centers for Medicare & Medicaid Services show that for the third consecutive year, healthcare spending grew in 2011 by 3.9 percent or a total of $2.7 trillion, the lowest growth rate recorded since CMS began tracking healthcare spending in 1960.

Published this month in Health Affairs, the National Health Expenditures Accounts, has been published for 52 years and is intended to give a broad view of the nation's healthcare spending. Significantly, the growth in healthcare spending has been exceeding the growth of the US economy as a whole and low growth rates from 2009 to 2011 has kept overall healthcare expenditures steady at 17.9 percent of GDP.

"The stable growth in national health spending in 2011 was the result of mixed trends as slower growth in the net cost of health insurance and non-commercial research and a decline in government public health activities was offset by slightly faster growth in personal healthcare goods and services," said study lead author Micah Hartman in a conference call announcing the findings.

"From a payer perspective the main drivers of the spending trend were Medicare, private health insurance and consumer out-of-pocket payments, all of which increased more in 2011 than in 2010, while the Medicaid program grew more slowly."

Medicare spending in particular showed a marked acceleration in 2011, increasing by 6.2 percent compared with a 4.3 percent increase in 2010. The researchers attributed the faster growth in 2011 to a one-time increase in spending under the program for skilled nursing facilities combined with faster growth in spending for physician services under fee-for-service Medicare and for Medicare Advantage.

The changing landscape of how insurance products are designed was the major factor for an increase in consumer out-of-pocket spending, which grew at an annual rate of 2.9 percent in 2011 compared with 2.1 percent in 2010. The primary drivers of this increase were higher levels of cost-sharing with consumers and the continued growth in the number of people enrolled in consumer directed health plans.

Other major areas of spending that increased in 2011 over the previous year include: retail prescription drugs (2.9 percent in 2011 versus 0.4 percent in 2010); physician and clinical services (4.3 versus 3.1 percent); and private health insurance (3.8 percent versus 3.4 percent).

Areas that saw spending slowed in 2011 compared to 2010 were primarily affected by changes in the Medicaid system. Hospital expenditure growth slowed to 4.3 percent in 2011 from 4.9 percent in 2010 due to hospitals holding the line on price increases, decreased utilization and decreases in Medicaid spending.

The growth in Medicaid expenditures was more than cut in half in 2011, registering growth of only 2.5 percent, down from a 5.9 percent increase in 2010. This was to two main causes: the discontinuation of the enhanced federal match which was part of the 2009 federal stimulus package; and the budgetary struggles of states during the economic downturn which led to many states curbing their benefits under the program.

Those looking to attribute the seeming stabilization of health spending increases to reforms taking place under the Affordable Care Act should look elsewhere, the study authors concluded.

"Although some provisions of the Affordable Care Act were in effect in 2010 and 2011, their impact on the overall health spending trend was minimal," Hartman said.

Instead, the bulk of the spending increase slowdown can be directly attributed to the economic recession and resulting economic malaise that has lingered since 2007.

"Although the health sector tends to be somewhat insulated from overall recessions, this one had an immediate effect on healthcare spending," the report noted. "…the recession's impact on insurance enrollment was one of the most influential contributors to the slower growth in national health expenditures, compared to previous recessions."

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