Fwd: qotd: National health spending in 2012 - a perspective

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Subject: qotd: National health spending in 2012 - a perspective
Date: Tue, 7 Jan 2014 09:43:21 -0800
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



Health Affairs
January 2014
National Health Spending In 2012: Rate Of Health Spending Growth
Remained Low For The Fourth Consecutive Year
By Anne B. Martin, Micah Hartman, Lekha Whittle, Aaron Catlin, the
National Health Expenditure Accounts Team

Abstract

For the fourth consecutive year, growth in health care spending remained
low, increasing by 3.7 percent in 2012 to $2.8 trillion. At the same
time, the share of the economy devoted to health fell slightly (from
17.3 percent to 17.2 percent) as the nominal gross domestic product
(GDP) grew by 4.6 percent. Faster growth in hospital services and in
physician and clinical services was mitigated by slower growth in prices
for prescription drugs and nursing home services. Despite an uptick in
enrollment growth, Medicare spending growth slowed slightly in 2012,
mainly due to lower payment updates. For Medicaid, slowing enrollment
growth kept spending growth near historic lows. Growth in private health
insurance spending also remained near historically low rates in 2012,
largely influenced by the nation's modest economic recovery and its
impact on enrollment.

Medicare

Medicare accounted for 20 percent of national health spending in 2012,
with expenditures reaching $572.5 billion (Exhibit 1). Overall, Medicare
spending growth slowed slightly, increasing by 4.8 percent in 2012
compared to 5.0 percent in 2011. Growth in fee-for-service expenditures,
which accounted for nearly three-quarters of total Medicare spending,
slowed from 4.3 percent in 2011 to 2.7 percent in 2012. Medicare
Advantage spending accounted for the remainder, increasing 10.9 percent
in 2012—a faster rate than in 2011, when growth was 7.0 percent.

Enrollment in Medicare for all beneficiaries (fee-for-service and
Medicare Advantage) jumped 4.1 percent in 2012—the largest one-year
increase in enrollment in thirty-nine years—and more than half of these
enrollees joined Medicare Advantage. The noticeable increase in total
Medicare enrollment reflected the oldest members of the baby-boom
generation, who became eligible to enroll in Medicare in 2011.

Total Medicare spending per enrollee grew by 0.7 percent in 2012—slower
than the 2.5 percent rate of growth in 2011. This slowdown was largely
due to a prominent decline in spending for nursing home care, which
declined by 2.2 percent in 2012 following an increase of 9.9 percent the
year before. This in turn was driven primarily by a one-time payment
reduction to skilled nursing facilities, which followed a large increase
in payments in 2011 corresponding to the introduction of the new payment
system. In 2012 this reduction was applied to skilled nursing facility
rates to recalibrate payments for the newly implemented payment system.15

For Medicare fee-for-service, per enrollee spending growth decelerated
from 2.7 percent in 2011 to 0.6 percent in 2012. In addition to the
decline in skilled nursing facility spending, slower growth in
fee-for-service spending was influenced by spending trends for
prescription drugs, physician and clinical services, and hospital care.
For beneficiaries with traditional fee-for-service Medicare,
prescription drug spending growth slowed because of the increased use of
popular lower-cost generic drugs. Slower growth in the volume and
intensity of physician services and inpatient hospital admissions
contributed to slower fee-for-service Medicare physician and hospital
spending in 2012. Finally, for all Part A and most Part B providers, the
ACA reduced payment updates in 2012, most notably for hospitals.

The acceleration in Medicare Advantage spending growth in 2012 was
driven by a 10.0 percent increase in enrollment. On a per enrollee
basis, however, Medicare Advantage spending growth slowed to 0.8 percent
in 2012 (from 1.6 percent growth in 2011), partially as a result of the
implementation of the ACA's new payment mechanism. That mechanism links
benchmark payment rates to fee-for-service costs, and its implementation
effectively lowered the increase in total Medicare Advantage payments.
In addition, the ACA required quality ratings of plans to factor into
payments beginning in 2012.

Conclusion

In 2012 the economy continued to modestly improve, and GDP grew faster
than health care spending, causing the health spending share of the
economy to fall slightly—from 17.3 percent to 17.2 percent. Spending
growth for personal health care goods and services accelerated in 2012
as trends for hospital services and physician and clinical services more
than offset one-time impacts that helped decelerate growth, such as
numerous patent expirations for brand-name retail prescription drugs and
a Medicare payment reduction for skilled nursing facilities. From a
payer perspective, Medicaid spending growth accelerated somewhat in 2012
after experiencing low growth in 2011, while Medicare and private health
insurance spending growth slowed slightly. These mixed trends produced
the fourth consecutive year of low overall health spending growth and
led to a relatively stable health spending share of GDP. However, this
pattern is consistent with historical experience when health spending as
a share of GDP often stabilizes approximately two to three years after
the end of a recession and then increases when the economy significantly
improves. Recently, however, the question has arisen about whether a
more fundamental change is occurring within the health sector and
whether this stability will endure. From our perspective, more
historical evidence is needed before concluding that we have observed a
structural break in the historical relationship between the health
sector and the overall economy.

http://content.healthaffairs.org/content/33/1/67.abstract


Comment: With the release of this annual report on health care spending
in the United States, many are celebrating the fourth consecutive year
of a slow down in spending increases, with some even suggesting that
this is a new permanent trend due in a large part to the implementation
of the Affordable Care Act (ACA). However, according to this report, ACA
"had a minimal impact on overall national health spending growth through
2012."

The reasons for increases in spending are complex and change from year
to year. The excerpt on Medicare, selected above, demonstrates some of
these variabilities. Spending in Medicare is important to understand
since it is often held up as a program that could serve us all well as a
single payer national health program. However, under our fragmented
system of financing health care, it is difficult to use the current
Medicare data to predict what spending might be under an Improved
Medicare for All program, particularly with the split in Medicare
between the traditional fee-for-service program and the private Medicare
Advantage plans, but also because Medicare has little control over most
of our health care spending. It is even more difficult to predict total
future health spending for the entire nation with our current
administratively complex, fragmented financing system.

If we had a unified single payer system, we could look at the variables
that really count when we try to predict future spending. These include
elements such as demographics, inflation, prices, legitimate costs,
access, new technology, elimination of ineffectual technology, and the
health of the economy. When you look at this list, it cries out for
adopting public policies that would ensure future value in our health
care spending. Many of these policies would be extremely difficult if
not impossible to implement under our current financing system. That is
perhaps the most important reason for replacing our dysfunctional system
with a single payer national health program - an improved Medicare that
covers everyone.