Another Modest Rise for Health Costs

Excerpted from New York Times, January 6, 2014 article by Robert Pear

Jan. 30, 2014 – National health spending grew slowly for the fourth consecutive year, increasing 3.7 percent in 2012 to $2.8 trillion, the federal government said Monday. But officials disagreed over whether the Affordable Care Act or lingering effects of the recession were primarily responsible for the remarkable trend.

As a share of the economy, health spending declined slightly, to 17.2 percent in 2012, from 17.3 percent in the prior year. For decades, health spending has grown faster than the economy, taking a bigger bite out of workers’ wages and the federal budget.

Health spending averaged about $8,900 a person in 2012, according to the annual report issued Monday by the government.

The authors of the report – civil servants at the Centers for Medicare and Medicaid Services – said that the Affordable Care Act, adopted in March 2010, had only “a minimal impact on overall national health spending growth through 2012” and had not yet significantly reined in or accelerated its growth.

“The relatively low rates of growth that we’ve seen over the last four years are consistent with the historical trends that we’ve seen when we look at health spending and gross domestic product,” said Aaron C. Catlin, an economist and co-author of the report. “It’s consistent with what we’ve seen in post-recessionary periods in the past.”

But the White House said the data vindicated President Obama’s health care policies.

“The years 2009 to 2012 saw the slowest growth in U.S. health care expenditures since the government started collecting this information in the 1960s,” said Jeanne M. Lambrew, a health policy coordinator at the White House.

“While there is a debate about how much the Affordable Care Act has contributed to this health cost slowdown,” Ms. Lambrew said, “there is no doubt that it reduced Medicare spending growth, and most experts believe that Medicare savings spill over into the private sector.”

Some experts, including the Congressional Budget Office, have reduced their projections of federal health spending, based in part on their belief that pervasive changes in the health care system would endure.

However, the authors of the new report, published in the journal Health Affairs, were more cautious.

“From our perspective,” they wrote, “more historical evidence is needed before concluding that we have observed a structural break in the historical relationship between the health sector and the overall economy.”

The last recession, the worst in decades, ran from December 2007 to June 2009. Mr. Catlin said that delayed effects of the recession – curtailed growth of the economy, employment and personal income – appeared to be the main reason for relatively low growth of health spending in recent years.

Some provisions of the new health care law increased spending and others reduced it, but the overall effects on spending were modest, said Anne B. Martin, an economist who was the principal author of the report. She estimated that the law had increased national health spending by a cumulative total of one-tenth of 1 percent from 2010 through 2012.

Comparing the experience of recent years, the report said that spending on hospitals and doctors increased at a faster rate in 2012 than 2011, while spending on prescription drugs and nursing homes grew more slowly.

Spending on hospital care increased 4.9 percent in 2012, to $882 billion, mainly because of a rise in prices and in the intensity and complexity of services, the report said. By contrast, the increase in 2011 was 3.5 percent.

At the same time, the report said, spending for doctors’ services and outpatient clinics grew by 4.6 percent in 2012, to $565 billion – up from growth of 4.1 percent in 2011.

But, it said, spending for prescription drugs grew just four-tenths of 1 percent in 2012, to $263 billion, compared with an increase of 2.5 percent in 2011.

“This reduced growth rate was driven largely by a slowdown in overall prices paid for retail prescription drugs as numerous brand-name blockbuster drugs – most notably Lipitor, Plavix and Singulair – lost patent protection in late 2011 and in 2012 and as generic versions became available,” the report said.

Almost three-fourths of all prescriptions filled in 2012 cost $10 or less per prescription, the study said. Generic drugs accounted for 77 percent of all prescriptions filled in 2012, up from about 70 percent in 2011, it said.

The aging of the baby boom generation is reflected in the new data. Enrollment in Medicare increased 4 percent in 2012, the largest one-year increase in 39 years, the report said. More than half of the new beneficiaries joined Medicare Advantage plans managed by private insurers under contract with the government. More than one-fourth of the 50 million Medicare beneficiaries are now in such private plans.

Spending on Medicare increased 4.8 percent, to $573 billion in 2012, while federal and state spending on Medicaid, for low-income people, grew 3.3 percent, to $421 billion, the report said.

Online article link: http://www.nytimes.com/2014/01/07/health/health-spending-rises-slowly-for-fourth-year-in-a-row.html?_r=0
A version of this article appears in print on January 7, 2014, on page A10 of the New York edition with the headline: Another Modest Rise for Health Costs