Health spending continued to grow at a slow rate last year, the Office of the Actuary (OACT) at the Centers for Medicare & Medicaid Services (CMS) reported. In 2013, health spending grew at 3.6 per cent and total national health expenditures in the United States reached $2.9 trillion, or $9,255 per person. The annual OACT report showed health spending continued a pattern of low growth—between 3.6 per cent and 4.1-- per cent for five consecutive years. The report is being published in Health Affairs.

The recent low rates of national health spending growth coincide with modest growth in Gross Domestic Product (GDP), which averaged 3.9 per cent per year since the end of the severe economic recession in 2010. As a result, the share of the economy devoted to health remained unchanged over this period at 17.4 per cent.

“This report is another piece of evidence that our efforts to reform the health care delivery system are working,” said CMS Administrator Marilyn Tavenner. “To keep this momentum going, we are continuing our efforts to shift toward paying for care in ways that reward providers who achieve better outcomes and lower costs.”

Total national health spending slowed from 4.1 per cent growth in 2012 to 3.6 per cent in 2013. The report attributes the 0.5 percentage point slowdown in health care spending growth to slower growth in private health insurance, Medicare, and investment in medical structures and equipment spending. However, faster growth in Medicaid spending, due to Medicaid expansion, helped to partially offset the slowdown.
 
Medicare spending, which represented 20 per cent of national health spending in 2013, grew 3.4 per cent to $585.7 billion, a slowdown from growth of 4.0 per cent in 2012. This slowdown was primarily caused by a deceleration in Medicare enrollment growth, as well as net impacts from the Affordable Care Act and sequestration. Per-enrollee Medicare spending grew at about the same rate as 2012, increasing just 0.2 per cent in 2013.

Spending on private health insurance premiums (a 33 per cent share of total health care spending) reached $961.7 billion in 2013, and increased 2.8 per cent, slower than the 4 per cent growth in 2012. The slower rate of growth reflected low enrollment growth in private health insurance plans, the continued shift of enrollees to high-deductible health plans and other benefit design changes, low underlying medical benefit trends, and the impacts of the Affordable Care Act.

Medicaid spending grew 6.1 per cent in 2013 to $449.4 billion, an acceleration from 4 per cent growth in 2012. Faster Medicaid growth in 2013 was driven in part by increases in provider reimbursement rates and some states’ expanding benefits.

Out-of-pocket spending (which includes direct consumer payments such as co-payments, deductibles, spending by the insured on services not covered by insurance, and spending by those without health insurance) grew 3.2 per cent in 2013 to $339.4 billion, slightly slower than annual growth of 3.6 per cent in both 2011 and 2012.

Among health care goods and services, slower growth in spending for hospital care and physician and clinical services contributed to slower growth in national health care spending in 2013. However, faster spending growth for retail prescription drugs in 2013 partially offset the overall slowdown.

Hospital spending increased 4.3 per cent to $936.9 billion in 2013 compared to 5.7 per cent growth in 2012. The lower growth in 2013 was influenced by slower growth in both price and non-price factors (which include the use and intensity of services). Growth in private health insurance and Medicare hospital spending decelerated in 2013 compared to 2012.

Spending for physician and clinical services increased 3.8 percent in 2013 to $586.7 billion, from 4.5 per cent growth in 2012. Slower price growth in 2013 was the main cause of the slowdown, as prices grew less than 0.1 per cent. Growth in spending from private health insurance and Medicare, the two largest payers of physician and clinical services, experienced slower spending growth in 2013, while Medicaid growth accelerated as a result of temporary increases in payments to primary care physicians.

Retail prescription drug spending accelerated in 2013, growing 2.5 per cent to $271.1 billion, compared to 0.5 per cent growth in 2012. Faster growth in 2013 resulted from price increases for brand-name and specialty drugs, increased spending on new medicines, and increased utilization.

In 2013, households accounted for the largest share of spending (28 per cent), followed by the federal government (26 per cent), private businesses (21 per cent), and state and local governments (17 per cent). Since 2010, the share of health spending financed by the federal government decreased—from 28 per cent to 26 per cent in 2013. At the same time, the share financed by state and local governments increased—from 16 per cent in 2010 to 17 per cent in 2013. These shifts resulted primarily from the June 2011 expiration of additional Medicaid funding provided by the federal government to the states through the American Recovery and Reinvestment Act of 2009.

The report includes all of the net impacts of the Affordable Care Act provisions as well as the budget sequester through 2013. The Affordable Care Act provisions that exerted downward pressure in 2013 were productivity adjustments for Medicare fee-for-service payments, reduced Medicare Advantage base payment rates, increased Medicaid prescription drug rebates and the medical loss ratio requirement for private insurers.