Health Spending Continues Slow Growth

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Last year saw the slowest growth in national health care spending since 1960, when such data was first recorded, according to a new report by actuaries at the Centers for Medicare and Medicaid Services (CMS). Spending grew by 3.6 percent, down from 4.1 percent growth in 2012.

Health care spending remained at 17.4 percent of GDP — its level since 2009 and well below prior years.

The slowdown appears in nearly every part of the health sector, from physicians to hospitals to equipment, and shows up in both private insurance and Medicare spending. In general, slower growth can be seen in prices for medical services and service utilization.

Medicare saw per-enrollee spending grow slower than economy-wide inflation, remaining virtually flat. Budget sequestration, first hitting Medicare in 2013, contributed to the slowdown, as did continued provider cuts from the Affordable Care Act (ACA).

However, Medicare prescription drug spending (up by 10.7 percent) and Medicaid spending (up by 6.1 percent) experienced faster growth than the general economy. Medicaid spending is expected to continue accelerating as the first beneficiaries from the ACA’s Medicaid expansion come online this year.

It is not clear whether slow growth will continue because temporary factors, such as the slow economic recovery, might be largely responsible. In October the actuaries projected that the next decade would see annual growth of about 1 percentage point faster than the economy — an increase from the last few years, but still lower than the historical average of about 2 percent.

External links:
The Health-Cost Slowdown Isn’t Just About the Economy (New York Times)
CRFB’s Senior Policy Director Testifies at Congressional Hearing on Reducing Health Care Spending

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