Health Spending Grows at Half Pre-Recession Level in 2011

Health-care spending in the U.S. grew at less than half the pre-recession level for the third straight year, as employers shifted more costs to strapped workers and state governments limited payouts for the poor.

Spending on hospital visits, medications and other care grew 3.9 percent to $2.7 trillion in 2011, matching the slowest growth in 52 years of record keeping, the Centers for Medicare and Medicaid Services said in a report yesterday in the journal Health Affairs. Growth was close to 8 percent before the U.S. entered an 18-month recession in December 2007.

Joseph Antos, who researches the economics of health policy at the Washington-based American Enterprise Institute, said changes in employer-sponsored insurance coverage has been a key factor in putting a damper on health-care costs.

“We’ve seen a slow down for a considerable amount of time and I think that is much more related to employer coverage tightening up than anything else,” Antos said by telephone. Employers are offering plans that have more cost sharing and higher deductibles, which result in lower premiums, he said.

A shift in government expenditures also has contributed as states cut provider reimbursements and restricted eligibility for Medicaid, the roughly $450 billion federal and state health program for the poor. Spending there rose 2.5 percent in 2011, less than half the rate of 2010, according to the report.

State Decisions

“Part of the slowing is due to policy decisions in states intended to slow growth,” said Thomas Johnson, president and chief executive officer of Medicaid Health Plans of America, which lobbies for insurers such as WellPoint Inc. (WLP)

So far, the effect of the 2010 Affordable Care Act on medical spending has been “minimal,” according to the report. That may change next year, when much of the insurance expansion created by the health-care system overhaul begins to take effect. The Obama administration projected in June that health spending would rise 7.4 percent in 2014.

Total U.S. health-care expenditures, which account for about 18 percent of gross domestic product, will surpass $3 trillion in 2014 and reach $4.8 trillion in 2021, according to administration forecasts.

Private Enrollment

The health law has ushered in some changes. Private health- insurance enrollment, which had fallen by 11.2 million from 2007 to 2010, increased by a net 1 million people last year, according to the report. That was related to 2.7 million customers added largely because of provisions in the health law that let young adults as old as age 26 sign on to their parents health plans, according to the economists’ analysis.

At the same time, spending on Medicare, the federal health program for the elderly and disabled, grew at a faster pace compared to 2010.

Premiums for private plans increased 3.8 percent, up from 3.4 percent in 2010, the analysis shows, which is based on government data first released in June.

Out-of-pocket spending by consumers rose 2.8 percent in 2011, compared with 2.1 percent in 2010, according to the CMS economists’ report. The increase was fueled by hospital and dental services and partially offset by a decline in spending on prescription drugs.

To contact the reporter on this story: Anna Edney in Washington at aedney@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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