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Health spending growth slower than average

Tue., Jan. 7, 2014

WASHINGTON – Soaring health care spending – which helped pave the way for President Barack Obama’s health law – continued to moderate in 2012, the fourth year of a historic slowdown in how much the nation pays for medical treatment, according to a new government report.

Overall spending on health care rose less than 4 percent in 2012, less than half the rate of a decade ago, independent economists at the Centers for Medicare and Medicaid Services concluded.

And for only the third time in the last 15 years, health spending rose more slowly than the overall economy. That meant that health care shrank from 17.3 percent of the U.S. economy in 2011 to 17.2 percent in 2012.

The authors of the report, published in the journal Health Affairs, attributed most of the slowdown to lingering effects of the Great Recession, when millions of Americans lost health coverage or cut back on medical care.

But experts believe the slowdown also reflects fundamental changes being made to the nation’s health care system as consumers, businesses and governments adjust the way they pay for medical care and as doctors, hospitals and other providers adjust the way they deliver it.

Many hope that could ultimately help make medical care more affordable.

“These are historically very low numbers,” said Gary Claxton, vice president of the nonprofit Kaiser Family Foundation, who closely follows health care spending.

Slower growth in government spending on the Medicare insurance program for the elderly in particular has already improved the federal budget outlook, helping to dramatically reduce projected deficits.

Medicare spent just 0.7 percent more per beneficiary in 2012 than it did in 2011. Just five years earlier, per-beneficiary spending was increasing 5.4 percent annually.

While this slowdown in government spending may indirectly benefit taxpayers, millions of Americans who get commercial health insurance have yet to see much direct relief, however. Their insurance premiums keep taking a larger share of their paychecks, even as health plans require more out-of-pocket spending by policyholders.

“Consumers who are covered with private health insurance have clearly experienced an erosion of coverage,” said Charles Roehrig, an economist who directs the nonprofit Altarum Institute’s Center for Sustainable Health Spending.

The average total cost for a family health plan provided through an employer – which is split between employer and employee – hit $16,351 in 2013, according to a survey by the Kaiser Family Foundation and the Health Research & Educational Trust.

The employee share of that premium was $4,565, up about 6 percent from 2012.

It’s unclear whether the slowdown in health care spending is enduring and whether it will ultimately benefit consumers more directly.

The authors of the latest report voiced skepticism that the slowdown will persist in the nation’s strengthening economy. In the past, health spending has accelerated after the economy has emerged from downturns.

“More historical evidence is needed before concluding that we have observed a structural break in the historical relationship between the health sector and the overall economy,” the authors concluded.

The report notes factors contributing to the slow growth in health spending that are unrelated to the economy, including the use of generic drugs and changing government payment policies that have slowed spending on nursing home care.

Other economists have identified still other factors that may be slowing cost growth, including changes to health insurance plans that make consumers pay more out of pocket for their care. That provides new incentives for consumers to economize.


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