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National Health Spending in 2012

By January 9, 2014Commentary

National health spending has become a preoccupation in the US and the slowdown in growth in recent years has been a subject of frequent comment, including here.  The most recent summary of the National Health Expenditure Accounts from the Office of the Actuary at CMS finds that on an unadjusted for inflation basis spending grew by 3.7% in 2012.   (HA Article)   At the same time, GDP grew at an unadjusted 4.6%, meaning that health spending actually dropped slightly as a percent of GDP.  Total spending was $2.8 trillion or $8915 per person, with the per person growth rate being 3.0%.  National health spending is 85% composed of personal health spending with the remainder being public health costs, government health administration, the net cost of health insurance and public investments in drug and other research.  Personal health spending actually grew by 3.9% in 2012, faster than in 2011, but the remaining portion of national health spending had slower growth to bring the overall rate down.

Hospital spending rose at 4.9%, a mix of unit price and volume; physician spending by 4.1%, almost all volume; drug spending grew at only .4% and nursing home spending at 1.6%.  Hospital and physician spending growth was higher than that in 2011, while the rate of increase in drug and nursing home costs was lower.  Among payer types, Medicaid spending grew by by 3.3% and out-of-pocket spending by 3.8%, both faster than the prior year.  Total spending on private health insurance premiums increased by 3.2% and Medicare spending rose by 4.8%.  Medical price growth was about 1.7%, accounting for over half the per capita growth rate of 3.0%.  Population growth, demographic shifts within the population and non-price factors like change in intensity of services accounted for most of the remainder of the spending increase.  The share of total spending borne by households stayed steady at 28%, as did the 21% paid by private businesses.  The federal government’s share declined slightly to 26%, while the states’ share grew to 18%.

The authors say that the reform law had little impact on the slowdown in health spending, with the only significant factor being the reduction in Medicare provider payment updates contained in the law.  They believe the deep recession is still impacting health spending growth and are leery of acceleration of increases as and if the economy improves.  The slowing in health spending is tremendous news from any perspective.  Our health spending is a burden on consumers, companies and governments.  There can be debate about what is causing the slowdown, whether it will persist, and whether the causative factors may have other not so pleasant consequences, such as higher consumer cost-sharing leading to avoidance of needed care,  but any slowing is welcome and we should all hope that growth in health spending continues to be lower than economic growth.

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