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National Health Spending Rose Slightly Due to Recession

Source: NY Times

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Posted on 10 Jan 2012

National health spending rose a slight 3.9 percent in 2010, as Americans delayed hospital care, doctor’s visits and prescription drug purchases for the second year in a row, the Obama administration reported Monday.

The recession, which lasted from December 2007 to June 2009, reined in the growth of health spending as many people lost jobs, income and health insurance, the government said in a report, published in the journal Health Affairs.

Lingering effects of the recession throttled back the explosive growth of health spending, which totaled $2.6 trillion, or 17.9 percent of the economy, in 2010, according to the government’s annual snapshot of health trends.

Health spending normally grows much faster than the economy. But in 2010 growth rates were similar, so that health care accounted for the same share of total economic output in 2009 and 2010.

“U.S. health spending grew more slowly in 2009 and 2010” than at any other time in the 51 years the government has been collecting such data, said

Anne B. Martin, an economist in the office of the actuary at the Department of Health and Human Services.
While the recession crimped spending by consumers, employers and state and local governments, the federal government picked up the slack.

Federal health spending shot up 40 percent in three years, to $743 billion in 2010, from $530 billion in 2007, the report said. Some of the growth resulted from an increase in Medicaid enrollment and a temporary increase in the federal share of Medicaid spending, authorized by the economic stimulus law of 2009.

Medicare spending, for older Americans and the disabled, grew in 2010 by 5 percent, the smallest rate of increase in more than a decade, the report said. The main reason was a slowdown in spending for the managed care program known as Medicare Advantage.

Although some provisions of President Obama’s health care overhaul took effect in 2010, government economists said they had had little impact on the overall level of health spending and, in some cases, simply shifted payments from one source to another.

One of the more remarkable findings in the report is that increases in the volume and intensity of health care services made only a tiny contribution to the growth of health spending in 2010. In the past, this factor, reflecting increases in the number and complexity of procedures, was often cited as a major reason for higher health spending.

In 2010, the study said, hospitals reported a decline in admissions and slower growth in emergency room visits and outpatient visits. Likewise, it said, doctor’s office visits declined, and spending for doctors’ services grew just 1.8 percent, to $416 billion in 2010. Total health spending averaged $8,402 a person, up 3.1 percent from 2009, the report said.

Doctors often prescribe drugs during office visits, and the decline in visits helped slow the growth of drug spending, as did the use of lower-cost generic medications. The number of prescriptions filled rose just 1.2 percent in 2010, and total retail spending on prescription drugs also grew 1.2 percent, to $259 billion, the slowest rate of growth in a half-century, the report said.

For the first time in seven years, total private health insurance premiums grew faster than insurers’ spending on health care benefits, the administration said. Premiums totaled $849 billion in 2010, while spending on benefits totaled $746 billion. The difference includes administrative costs and profits.

The White House said the gap showed that the new health care law was needed to “keep insurance companies in check.” Under the law, insurers must disclose and justify premium increases larger than 10 percent.

In 2010, Ms. Martin said, “total spending on private health insurance benefits grew at the slowest rate in the 51-year history of the national health expenditure accounts.” Private insurance spending slowed, she said, because fewer people had private insurance, insurers shifted some costs to subscribers, charging higher co-payments and deductibles, and some subscribers switched to health plans with lower premiums.


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