Washington Health Policy Week in Review
CMS Attributes Steady Rates of Health Spending Growth to Recession, Lower Use of Services

By Nellie Bristol, CQ HealthBeat Associate Editor

January 10, 2012 -- The lingering effects of the recession kept people from using medical services, leading to the second year of historically slow growth and a stabilization of health spending as a share of gross domestic product, the Centers for Medicare and Medicaid Services (CMS) actuaries recently reported.

Health spending increased 3.9 percent in 2010, up slightly from 3.8 percent in 2009. Rates over the previous several decades ranged from a high of 13.1 percent in 1980 to 4.7 percent in 2008, according to the actuaries' yearly report, published in the January issue of Health Affairs. As a result of the slowing, health spending as a share of the gross domestic product stayed at 17.9 percent for the second consecutive year.

Overall, health spending totaled $2.6 trillion in 2010, or $8,404 per person, compared with 2009 when spending was $2.5 trillion, or $8,149 per capita.

The study says the health care overhaul (PL 111-148, PL 111-152) had little effect on growth figures. While some provisions of the law are in effect, including some drug-related benefits and a high-risk pool to cover those with pre-existing conditions, the act added only 0.1 percentage point to the total. The act "had a negligible impact on total spending or shifted the distribution of spending without affecting the overall rate of growth," the analysis says.

"The slow growth in health spending in 2009 and 2010 was influenced by slower growth in the use of health care goods and services as consumers remained cautious about their spending—in part because of losses of private health insurance coverage, lower median household income and future financial uncertainty," the report says.

Driving the trend was lower spending for hospital care and physician and clinical services, as well as "record low growth" in prescription drug costs, the researchers say. Hospital care spending grew 4.9 percent, compared to 6.4 percent in 2009.

"In 2010, consumers continued to postpone medical care, as demonstrated by a decline in median inpatient admissions and slowing growth in emergency department visits, outpatient visits and outpatient surgeries," the analysis says. Physician and clinical services spending grew 2.5 percent in 2010 compared to 3.3 percent in 2009.

Prescription drug spending grew 1.2 percent, compared to 5.1 percent in 2009. Researchers attributed the decrease to slower growth in the number of drugs used, increased use of generic medications, patent expirations of some brand-name drugs and introduction of fewer new drugs than in previous years.

More than a statement on future trends in health spending, the analysis "shows the health care industry and people's use of health care really is affected by recession," said Paul Ginsburg, president of the Center for Studying Health System Change.

A question raised by the study is whether people are foregoing needed care that will then require larger health expenditures in the future, or if it heralds a longer-term trend of less use of nonessential care, he added.

"We know that when people economize on care that some of the things they economize on are just fine —self-limiting problems—and some of them will result in the condition becoming more serious and perhaps more difficult to treat later on," Ginsburg said.

Another question is whether, as in other economic downturns, health spending will resume its climb after the recession ends. "Will things rebound? They have in the past, but that doesn't mean that this cycle and the future will be like it has been in the past," said Stephen Heffler, director of the CMS National Health Statistics Group.

In other findings, the federal government took on a larger percentage of health care spending in 2010, contributing 29 percent of all spending, compared to 23 percent in 2007. The percentage for other sponsors fell accordingly, with the state and local percentage going from 18 percent in 2007 to 16 percent in 2010, the business percentage declining from 23 percent to 21 percent and the household percentage decreasing from 29 percent to 28 percent.

The analysis also showed a significant decline in Medicare Advantage enrollment growth. Since 2005, enrollment growth was in the double digits, but it fell to 5.6 percent in 2010. Fee-for-service Medicare enrollment showed an increase of 1.5 percent after several years of decreases and growth of only 0.2 percent in 2009.

The White House said the analysis was good news because it showed "no spike in health care costs due to health reform." But the report notes that major provisions of the act, including health insurance exchanges and Medicaid expansion, won't occur until 2014.


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