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Rise in U.S. Health Care Spending Reaches Historic Lows

January’s issue of Health Affairs reports that US health care spending reached historically low growth rates in 2009 and 2010.  According to analysts at CMS, the low rate of growth reflects lower utilization in health care than in previous years. Health care spending only grew 3.9% in 2010, which is just 0.1 percentage point faster than 2009.  Health spending as a share of the overall economy remained at 17.9% of the gross domestic product (GDP) as the economy rebounded and GDP grew 4.2%. This share has risen over time from 5.2% in 1960.

CMS attributed the low rate to the recession. Due to high unemployment, continued loss of private coverage, and increased out-of-pocket costs, many individuals chose to forgo care or seek less costly alternatives. (Read more at California Healthline).

Here are some key findings from the report, according to Health News Digest:

  • Growth in total private health insurance premiums slowed from 2.6% in 2009 to 2.4% in 2010. This is likely due to fewer people enrolling in plans or people moving to plans with less-costly premiums.
  • The net cost of insurance increased by 8.4% in 2010 while consumer out-of-pocket spending increased by 1.8%.
  • Retail prescription drug spending grew 1.2% in 2010, compared to 5.1% in 2009 (this is the slowest recorded rate of growth for prescription drug spending since 1960).
  • The federal government financed 29% of the nation’s health care spending in 2010, an increase from 23% in 2007. Part of the increase was a result of enhanced Federal Matching Assistance Percentages (FMAPs) under the American Recovery and Reinvestment Act (ARRA).
    • Medicare spending grew 5% in 2010, a decrease from 7.0% in 2009.
    • Medicaid spending increased 7.2% in 2010, a decrease from an 8.9% growth in 2009.
  • State and local government share of total health spending declined from 18% in 2007 to 16% in 2010 (in part due to temporary assistance from ARRA).
  • Hospital spending (30% of total health care spending) grew 4.9% in 2010 compared to 6.4% in 2009.
  • Physician and clinical services spending (20% of total health care spending) grew 2.5 % in 2010, compared to 3.3% in 2009.
  • Private businesses financed 21% of total health spending in 2010, compared to 23% in 2007.

The report also found that ACA only contributed 0.1 percentage points to the overall increase in health care spending.

Acting CMS administrator, Marilyn Tavenner, stated “We have worked hard since the passage of the Affordable Care Act in 2010 to lower health care cost growth. We believe that the tools in health reform will help keep health care cost growth low while improving the value of care for consumers.”

Read the study here.