U.S. Health Spending Rises as Slowest Pace Since 1960

U.S. health-care costs grew 3.6 percent to $2.9 trillion in 2013, the smallest increase in more than 50 years and one that probably won’t be matched soon as spending accelerates to meet the needs of millions gaining insurance under Obamacare.

The nation has experienced unusually low health-care spending growth five years in a row as the 2009 recession and the slow economic recovery caused Americans to scale back their use of hospitals and other medical services, actuaries at the Centers for Medicare and Medicaid Services said yesterday in a report published by the journal Health Affairs.

In a sign of things to come, spending by Medicaid, the federal-state program for the poor, defied the trend and grew by about 6.1 percent in 2013 to $449 billion. Six states and the District of Columbia expanded Medicaid coverage beginning in 2012, and enrollment increased 2.7 percent last year, the actuaries said.

Programs offered under the Patient Protection and Affordable Care Act, known as Obamacare, have extended insurance coverage this year to more than 10 million people who previously lacked it. As newly covered Americans seek care, health spending is projected to rise 5.6 percent in 2014, marking an end to a slowdown the CMS actuaries say is linked to economic conditions.

“Over a longer time period, growth in health spending and GDP have tended to converge at the end of economic recessions,” Anne Martin, an economist in the actuary’s office, told reporters in a news conference. The recent trend “is not unique and is consistent with historical patterns.”

Different View

Some economists have argued that fundamental changes in the way health care is delivered in the U.S., including those wrought by the Affordable Care Act, have also helped to slow health spending over the past five years. As one example, the law punishes hospitals who readmit too many patients within 30 days of a discharge by reducing their Medicare payments. About 150,000 fewer Medicare patients were readmitted to hospitals in 2012 and 2013 as a result, CMS has said.

Economists have been hard-pressed to quantify the effect of the health law on spending, however. The White House’s Council of Economic Advisers has estimated the Affordable Care Act shaved at least one-half percentage point from the growth rate.

Unique Situation?

“The recent situation is unique, in the sense that growth in medical costs is lower than would be predicted given the growth of GDP and the historical relationship between GDP growth and medical spending increases,” David Cutler, a Harvard University health economist, said in an e-mail.

Cutler, who has advised President Barack Obama, is at odds with the CMS actuaries by arguing that the economy accounts for just more than one-third of the spending slowdown. Changes in the health system including greater efficiency by hospitals and doctors, increased out-of-pocket spending requirements for patients and less use of expensive technology and brand-name drugs have had a greater effect, he said in a 2013 paper published by Health Affairs.

The report released yesterday is an annual assessment of health spending in the U.S. that has been measured since 1960. The next lowest growth rate was 3.8 percent in 2009, CMS said.

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