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In 2011, U.S. healthcare spending growth stayed at slowest rate in 52 years

By Jessica Zigmond
Posted: January 7, 2013 - 12:01 am ET

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For a third year in a row, U.S. healthcare spending in 2011 grew at its lowest rate in the 52 years that federal officials have tracked the figure, according to annual statistics from CMS' Office of the Actuary.

The year 2011 marked the third consecutive year that healthcare spending grew at a rate of 3.9%, while healthcare as a share of gross domestic product remained at 17.9% from 2009 through 2011. The statistics came from the National Health Expenditure Accounts, which have been published for 52 years. Analysts noted that the high unemployment, loss of private insurance and a decrease in the amount of resources pay for healthcare resulting from the economic recession between December 2007 and June 2009 led to historically low healthcare spending growth between 2009 and 2011.

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Although overall healthcare spending remained unchanged, certain areas of healthcare experienced faster growth in 2011, such as Medicare spending, which grew at a rate of 6.2% from 4.3%, which the findings showed is a result of a one-time increase in spending for skilled-nursing facilities and also faster growth in spending for physician services in fee-for-service Medicare and for Medicare Advantage. Out-of-pocket spending also rose—to 2.8% in 2011 from 2.1% in 2010—which the report says is partly because of higher cost-sharing and increased enrollment in consumer-directed plans.

Evidence about how well consumer-directed plans are faring is mixed, said Rick Foster, who will retire this month from his position as CMS' chief actuary.

“The costs are certainly lower but are they lower because the whole idea is working, or are they lower because healthier people tend to go for high-deductible coverage and less healthy people tend to stick with traditional coverage?” Foster said. “That remains to be seen.”

Meanwhile, certain segments witnessed slower growth. For instance, hospital spending reached $850.6 billion in 2011, increasing about 4.3%, or a 0.6 percentage point slower than the 4.9% growth in 2010. One primary factor is that hospital price growth increased 2.1% in 2011, which was down from the 3% level in each of the previous three years.

“In addition to that, we saw a decline in inpatient days and a slowdown in outpatient visits for 2011, reported by the American Hospital Association,” Micah Hartman, a statistician in the CMS Office of the Actuary, said during a news conference at the National Press Club. “And finally, the big piece being also that Medicaid spending slowed pretty dramatically in 2011.

Medicaid expenditures also grew at a slower pace, to 2.5% in 2011 from 5.9% in 2010. The reasons for this include continued pressure on state budgets in a recovering economy and also a shift in spending from the federal government to the states, which took place in June 2011 when enhanced federal aid to states expired.

The findings—published in the journal Health Affairs—also noted that the Patient Protection and Affordable Care Act had minimal effects on healthcare spending growth in both 2010 and 2011. One area that did have an impact was a provision that expanded private health insurance coverage to dependents under the age of 26.

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