The CMS Office of the Actuary has issued its preliminary look at total health spending in the United States in 2013. (HA Article) On a national basis, spending rose to $2.9 trillion in 2013, up 3.6% from 2012 and representing a stable 17.4% of GDP. On a per capita basis, spending was $9,255 per person, an increase of 2.9% over 2012, which in turn had a 3.4% per person increase over 2011. The increases in spending have more closely mirrored economic growth over the last few years. Private insurance premium increases were 2.8% higher, a decline from 2012’s 4% growth and private insurance benefit payments went from a 4.4% rise in 2012 to a 2.8% one in 2013. Medicare spending growth also slowed, from 4% in 2012 to 3.4% in 2013.
The factors behind increases in national health spending are economy-wide price inflation, medical-specific price inflation, changes in population, changes in the age/sex mix of the population and a residual factor relating to use and intensity of services. Medical prices and the use and intensity of services are roughly equally responsible for the deceleration in overall spending growth. Medical prices grew only 1.3%, compared to 1.6% in 2012, while utilization rose 1%, slightly less than the 1.2% rise in 2012. The slow growth in these factors accounted for the slower overall increase in spending. Medicare accounted for 20% of total health spending. The fee-for-service side of the program saw spending rise at 1.7%, although enrollment increased only 1%; while Medicare Advantage enrollment grew 9.4%, but spending only rose 7.8%, reflecting payment cuts to the Medicare Advantage plans. Private insurance covered 189.3 million people in 2013, with total spending of $846 billion on benefits. Private plan enrollment remained well below the pre-recession peak of 197.5 million. High deductible plans covered 20% of the privately insured population. Medicaid is now up to 15% of total spending, with a 6.1% increase over 2012, significantly faster than either 2012 over 2011 or 2011 over 2010. Medicaid enrollment rose 2.7%, but likely skyrocketed in 2014.
Out-of-pocket spending was 12% of total health spending, rising 3.2%. Hospital spending was $937 billion in 2013, growth of 4.3%. Physician and clinical spending rose 3.8% to $586.7 billion. Both hospital and physician spending increased at a slower rate than they did in 2012. The drug industry accounted for $271 billion of the spending, a rise of 2.5%, with prescriptions dispensed increasing by 1.6%. Households paid 29% of all health spending, private businesses 23%, the federal government 23% and state and local governments 17%. That household share is actually larger, really close to 100%, since our taxes pay for the federal and state government spending and the amount employers spend on health insurance in essence comes out of workers’ wages.
Less national spending on health care is probably a good thing, as long as it is accompanied by improvement in the citizen’s health status and health outcomes. But what should be very apparent at this point is that the slowdown in spending is largely due to two factors which are probably not sustainable. One is the government dictated reimbursement for Medicare and Medicaid. At some point access problems will likely be caused by providers’ unwillingness to continue to accept what they perceive as too low a payment level. The second, and even more troubling factor, is that the commercially insured population is facing much higher cost-sharing which is deterring use of health services. Some of that cost avoidance is likely for services which were needed and appropriate. The reduction in health spending growth is being achieved on the backs of the middle class and may be jeopardizing their health.