U.S. Health Care Spending Growth Continues at Slow Pace

January 21, 2013

According to the latest article on health spending by the actuarial team at the Centers for Medicare and Medicaid Services (CMS), U.S. health spending is increasing at a slow and steady rate, say Thomas Miller and Catherine Griffin of the American Enterprise Institute.

  • Compared with long term trends of substantial growth, health spending increased at an annual rate of 3.9 percent in 2011.
  • The year 2010 marked the lowest rate of annualized personal expenditures on health care since the National Health Expenditure Accounts statistics were first calculated in 1960.
  • Growth in Medicaid spending also grew slowly due to the overall economy, reduced federal funding and shrinking state budgets.

One trend that has remained steady throughout the economic downturn is a decrease in the share of out-of-pocket spending relative to national health spending as a whole. For more than 50 years, with only a couple of exceptions, this percentage has dropped nearly 10 percent. The CMS predicts that out-of-pocket spending will continue to fall as the Affordable Care Act (ACA) is implemented, reaching a low of 9.4 percent by 2021.

Miller and Griffin say that in the future, increasing demand for Medicaid coverage under the ACA will result in a decrease in coverage as available funds run dry. They wonder if the nation's health care providers will be able to meet the increasing demand for subsidized care that pays lower rates when the major mandates of the ACA begin in 2014.

  • Slow growth rates in health spending can likely be attributed to an anemic economic recovery.
  • Increases in taxes, deficits, spending and regulation are unlikely to aid an already struggling health care system.
  • Supporting job growth, encouraging private health coverage, rewarding capital formation and increasing the payoffs for risky innovations might encourage spending and ease pressure on America's health infrastructure.

Source: Thomas Miller and Catherine Griffin, "U.S. National Health Care Spending Continues Trend of Slow Growth," American Enterprise Institute, January 9, 2013.

 

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