WASHINGTON– Health spending in 2013 grew at the slowest rate since the federal government began keeping track in 1960, in part because of lower spending by both Medicare and private health insurance plans, especially on physician services.
The lingering effects of the 2009 recession played a role, and the Affordable Care Act had a negligible impact, adding to spending in some categories, and reducing it in others, according to economists with the Centers for Medicare & Medicaid Services. Their findings were published Dec. 3 in the journal Health Affairs (doi:10.1377/hlthaff.2014.1107).
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Overall spending grew 3.6% in 2013, slower than the 4.1% it grew in 2012.
Overall spending grew 3.6% in 2013, slower than the 4.1% it grew in 2012, Micah Hartman of the Office of the Actuary at CMS, said in a briefing with reporters. The nation’s health bill totaled $2.9 trillion in 2013, or about 17% of the gross domestic product.
Medicare spent $586 billion in 2013, accounting for 20% of the nation’s health tab. Expenditures by that program rose only 3.4%, compared with 4% in 2012, in part because of clampdowns on spending for fee for service. Medicare, along with most payers, spent less on both hospital and physician services in 2013.
The program’s physician spending was restrained by a 2% across-the-board cut mandated by sequestration, and a 0% increase in the Sustainable Growth Rate formula. Prices for physician services also had little impact, rising by just 0.1%, Mr. Hartman said.
Use and intensity of physician and hospital services across the health care system had rebounded a bit in 2012 from their recession-related lows, but shrunk again in 2013, the CMS economists reported.
But Medicaid spending on physician services grew by10% in 2013, compared with just under 3% growth in 2012. That was because of the temporary increase in Medicaid reimbursement to primary care physicians that was established by the ACA. That pay bump expires on Dec. 31.
Medicaid spending, which makes up 15% of the nation’s health bill, hit $450 billion in 2013, a 6% increase from the previous year. That continued an upward trend, as did enrollment, which grew by almost 3%, compared with just under 2% the year before. Enrollment is expected to sharply spike in 2014, when the ACA is more fully in effect, said David Lassman of the CMS Office of the Actuary.
Private insurers still account for the largest portion of America’s health budget, paying a third of the tab. They, too, spent less on physician services in 2013. Spending was also reined in by lower premiums and ACA provisions that kept a lid on rate increases.
The CMS economists noted that private insurers have been successful in shifting more consumers into high-deductible health plans, which may in turn be having a dampening effect on their use of health care. “Consumers enrolled in high-deductible plans tend to use services at a lower rate than those enrolled in plans with lower or no cost sharing,” they wrote.
As to the effects of the ACA, the economists said that the law helped reduce spending through productivity adjustments to Medicare fee-for-service payments, reduced Medicare Advantage payments, and increased prescription drug rebates for Medicaid. But it also raised costs through Medicaid expansion, increased Medicaid payments for primary care, and subsidized prescription drugs under Medicare Part D.
“The key question is whether health spending growth will accelerate once economic conditions improve significantly,” Mr. Hartman said in a statement. “Historical evidence suggests it will.”
The report updates the economists’ spending projections for 2013, which were issued in September.
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