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Health care spending growth restrained by economy

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WASHINGTON — National health spending last year continued a trend of low growth, according to an analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS).

The CMS Office of the Actuary estimates that in 2013 U.S. health care spending in the grew at a rate of 3.6% over the previous year to $2.9 trillion, or $9,255 per person. The increase was slower than the 4.1% growth in 2012 and continued a pattern of low growth that has held relatively steady at between 3.6% and 4.1% annual growth for five consecutive years.

The continued low growth in health spending is consistent with the modest overall economic growth since the end of the recent recession and with the long-standing relationship between economic growth and health spending.

Health spending’s share of the nation’s gross domestic product remained at 17.4% in 2013.
The study, according to the journal Health Affairs, shows slower growth in private health insurance and in Medicare contributed to the 0.5 percentage-point slowdown in the nation’s health care spending growth. Private health insurance premium growth slowed from 4% in 2012 to 2.8% in 2013. Growth in private insurance benefits slowed from 4.4% in 2012 to 2.8% in 2013.

Medicare spending growth decelerated as a result of slower growth in enrollment, net impacts of the Affordable Care Act and the federal budget ­sequestration.

“The key question is whether health spending growth will accelerate once economic conditions improve significantly,” said Micah Hartman, a statistician in the Office of the Actuary at CMS and lead author of the Health Affairs article. “Historical evidence suggests it will.”

Legislation, including the ACA and budget sequestration, affected spending growth trends in 2013, particularly for Medicare. 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 (which requires insurers spend a minimum percentage of revenue on medical claims and health care quality ­improvements).

Other provisions — such as early Medicaid expansion initiatives, a temporary increase in Medicaid primary care provider payments, reducing the Medicare Part D doughnut hole and the implementation of prescription drug industry fees — exerted upward pressure on health spending growth.

Major areas where spending growth accelerated in 2013 over 2012 included retail prescription drugs (up 2.5%) — spending reached $271.1 billion in 2013.

This follows low growth of just 0.5% in 2012, which was due largely to a number of blockbuster drugs losing their patent protection and becoming available much less expensively in generic form. The share of prescriptions filled with generic drugs rose to 80% last year, up seven percentage points from 2011.

Other factors influencing the 2013 pickup in growth rate included price increases for brand-name and specialty drugs as well as increased spending on new medicines and increased utilization. Specialty drugs accounted for under 1% of prescription drugs dispensed but nearly 28% of total pharmacy-related prescription drug spending last year. Retail sales of prescription drugs accounted for 9.3% of all health spending.

Drew Altman, president and chief executive officer of the Kaiser Family Foundation, notes that despite an overall slowdown in health care spending, the nation continues to follow a fragmented approach to such expenditures.

“There is little coordination of the disparate efforts; we can’t say for sure what is working and what is not,’’ Altman wrote in a commentary published in The Wall Street Journal.


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