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Where is Medical Cost Trend Going?

By February 18, 2013Commentary

The amount of health care spending in the United States, rightly or wrongly, is looked at as one of our biggest problems.  And as long as that spending grows at a rate faster than the economy, it becomes a bigger problem.  Over the last few, probably largely due to the recession, health spending growth has moderated, but also has continued to increase well over the rate of GDP growth.  Proponents of the federal health reform law claimed that it would put in place a number of initiatives that would limit spending rises, but others have noted that it is just as likely that aspects of the law will accelerate spending.  Trends this year and next will prove crucial and a new brief from Mark Farrah Associates looks at current medical expense trends for large health plans, which insure the majority of Americans, including those covered by Medicare and Medicaid.  Three companies, Wellpoint, Kaiser and United HealthGroup, paid over 30% of all medical expenses in 2011.   (Mark Farrah Report)  The brief finds that medical cost trend for all health plans did grow more rapidly in 2011, by 5.5%.  On a per capita basis, the increase was only 2.4%.   Hospital spending was relatively increased and drug spending relatively down.  About 86% of all insurance premiums went to medical expenses in 2011, roughly the same as in 2010.  Mark Farrah suggests, however, that medical spending was beginning to tick up in 2011 and that their early analysis of 2012 suggests further growth.  There are other warning signs that providers are beginning to increase prices to health plans and that consumers are beginning to spend more on medical care after pulling back during the recession.

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