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Medicare Spending Growth Moderate Despite Big 2012 Enrollment Jump

By John Reichard, CQ HealthBeat Editor

January 6, 2014 -- Medicare spending in 2012 grew 4.8 percent to $573 billion even as enrollment in the program saw its largest one-year increase in 39 years, according to a recent government analysis.

The Medicare spending growth rate was below that for 2011, which was 5 percent. And total Medicare spending per enrollee grew by only 0.7 percent in 2012, slower than the 2.5 percent rate of growth in 2011, said the report by the Office of the Actuary at the Centers for Medicare and Medicaid Services.

Enrollment in 2012 increased 4.1 percent, reflecting the entry into the program of the oldest members of the baby boom generation. More than half of the new enrollees joined the Medicare Advantage program, made up of private health plans that contract to deliver Medicare services.

The relatively small increase in 2012 in Medicare spending per enrollee "was largely due to a prominent decline in spending for nursing home care, which declined by 2.2 percent in 2012 following an increase of 9.9 percent from the year before," said the study posted by the journal Health Affairs.

"This in turn was driven primarily by a one-time payment reduction to skilled nursing facilities," it added.

Medicare spending per enrollee in the traditional fee-for-service part of Medicare rose only 0.6 percent in 2012, down from 2.7 percent in 2011.

This slower growth in fee-for-service spending also stemmed from slower growth in prescription drug spending in addition to the decline in spending for nursing facility care. Smaller provider payment updates under the health law also had an impact. Although spending grew overall for Medicare Advantage, the growth rate per enrollee was only 0.8 percent compared to 1.6 percent in 2011. This partly stemmed from a new payment mechanism in the health care law (PL 111-148, PL 111-152).

Meanwhile, Medicaid spending increased 3.3 percent in 2012, compared to 2.4 percent in 2011. "These were the two slowest annual rates of growth in the history of Medicaid," the study said. But with the expansion of the program this year under the health care law its spending is expected to jump.

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