Anesthesia Management: Experts unsure if slow health spending growth will hold as economy improves

National health spending is growing at the slowest rate since 1960, a welcome change to policymakers after decades of inflation.

National health spending is growing at the slowest rate since the federal government began tracking the trend in 1960, a welcome change to policymakers after decades of inflation. But experts aren’t sure if the slowdown is a sign that the healthcare spending rationalization is taking hold as new policies take effect.

U.S. healthcare spending has been growing slower than the historical average since 2008, but in 2013 health spending increased by just 3.6 percent, down from a rate of 4.1 percent in 2012, to $2.9 trillion, or $9,255 per person, according to an annual study by federal officials published in Health Affairs.

“The key question is whether health spending growth will accelerate once economic conditions improve significantly,” said Micah Hartman, a statistician in the CMS Office of the Actuary and lead author of the study, citing the lingering effects of the Great Recession and the rise of high-deductible private insurance as contributing factors.

“Historical evidence suggests it will,” he said.

Since 2009, healthcare has hovered at just above 17 percent of U.S. gross domestic product. But even if the rate of healthcare inflation holds, overall spending is bound to rise as the Baby Boomers continue to age and require more health services, the uninsured gain coverage through exchanges and new generations with diabetes, obesity and heart disease live with chronic conditions.

Meanwhile, 2013’s data suggest that health reform is having an affect. The slower growth was primarily driven by private health insurance and Medicare, which together contributed to a 0.5 percent slowdown, according to the Health Affairs study.

The growth of private health insurance premiums slowed from 4.0 percent in 2012 to 2.8 percent in 2013, and spending on commercial insurance benefits slowed from 4.4 percent to 2.8 percent in 2013, representing $961.7 billion, according to the study.

Among the contributing factors in private insurance’s slower rate of growth have been a shift to enrollment in consumer-directed high deductible plans — which is likely to accelerate as employers face the Affordable Care Act’s “Cadillac tax” on generous health plans in 2018 — and historically low underlying benefits cost trends, Harmand said.
Medicare spending growth, meanwhile, decelerated from a 4 percent growth rate in 2012 to 3.4 percent in 2013, reaching $585.7 billion in 2013, due largely to a slower pace of enrollment, net impacts of the ACA and the federal budget sequestration.

Across payers, hospital spending increased by 4.3 percent in 2013 — reaching $936.9 billion — down from a rate of 5.7 percent in 2012, amid decreased utilization of hospital inpatient services and a slower rate of growth in prices. Spending on physician and clinical services slowed from a growth rate of 4.5 percent in 2012 to 3.8 percent in 2013, thanks to the slowest price growth in medical services since 2002, according to the study.

“Legislation, including the ACA and budget sequestration, affected spending growth trends in 2013, particularly for Medicare,” Hartman said in the study.

“Several key ACA provisions exerted downward pressure on health spending growth, including the adjustments to Medicare fee-for-service payments, reduced Medicare Advantage base payment rates, increased Medicaid prescription drug rebates and the medical loss ratio requirement.”

At the same time, other provisions “exerted upward pressure on health spending growth,” including early Medicaid expansion initiatives, a temporary increase in Medicaid primary care provider payments, a reduction of the Medicare Part D “doughnut hole” and prescription drug industry fees.

Drug pricing and Medicaid were two areas where the rate of growth actually increased last year. Retail prescription drug spending increased by 2.5 percent in 2013, to $271 billion, following a slow rate of growth of 0.5 percent in 2012, when a number of blockbuster drugs became available in generic form. Last year also showed the rise of speciality drugs, a recent trend that is likely to grow this decade.

Medicaid spending also grew by 6.1 percent in 2013, up from 4 percent in 2012, to reach $449 billion — 15 percent of total national health expenditures. “The faster growth in 2013 was due in part to increased growth in some provider reimbursement rates and a temporary increase in payments to primary care physicians mandated by the ACA,” Hartman said.