2011 Health Spending Growth Remains Near Historic Lows

[Greenbeard]

Not too long after the final data showing that 2010 saw slow spending growth economy-wide was announced ("National Health Spending Grew Slowly In 2010"), we now have preliminary data showing that last year also saw historically slow growth in health care spending.

Especially interesting is the slow growth of prices:

2011 Health Spending Growth Remains Near Historic Lows

ANN ARBOR, Mich., Feb 09, 2012 (BUSINESS WIRE) -- New analysis shows that health care spending in the U.S. in 2011 grew at one of the slowest rates in 50 years according to the February Health Sector Economic Indicators briefs released today by Altarum Institute's Center for Sustainable Health Spending.

Altarum's reports provide the first look at full-year 2011, showing health spending at $2.71 trillion. Spending was up 4.4 percent from 2010--the third slowest rate of growth since national health expenditures have been tracked. The health spending share of gross domestic product was 18.1 percent in December 2011, up from 16.4 percent at the start of the recession (December 2007), but down slightly from the all-time high of 18.2 percent in June 2011.

"With historically low health price inflation, low utilization growth and some signs of lower health employment growth, we could be entering an era of extended health care cost control," said center director Dr. Charles Roehrig.

Altarum's data indicate that health care price inflation was only 2.1 percent for all of 2011, the lowest annual figure since 1998, when it stood at 2.0 percent. Health employment in January 2012 rose by 31,000, well above the 2-year average of 22,000 jobs and contrasting with weak employment growth seen in the last quarter of 2011. At 10.73 percent of all jobs in January 2012, the health employment share is fractionally lower than the all-time high of 10.74 percent in October 2011.

 

[Oddball]

Spending on virtually everything is near historic lows...Big whoop.

 

[Greenbeard]

Spending growth is the point of interest here. Even as utilization is returning post-recession spending growth is impressively low, in part because health care price inflation is so modest.

Couple those national figures with the continuing slowdown in Medicare spending growth in particular and there's plenty of reason for optimism.

Medicare costs have risen by an average of about 12% a year since the early 1970s, and they grew by about 9% a year between 2000 and 2009. But things started to change in 2010 according to the nonpartisan Congressional Budget Office. That year’s increase was only 4.3%. And in 2011, it was even lower, at 3.8%. Projections now put the growth rate in 2012 at close to zero.

The spending slowdown for Part B of the program, which covers physician and other outpatient services, has been especially dramatic. The program’s chief actuary sees spending growth declining to the lowest levels ever. [...]

So, is Medicare doing something right, or is its spending slowdown an aberration?

An answer may lie in a comparison with private insurance. According to an analysis by Standard and Poors (using a different methodology than CBO), in the 12 months starting in May 2010, spending growth moderated in both Medicare and the private sector. But under Medicare, the drop was much steeper. Medicare’s growth rate fell to a meager 2.6%, while the rate for private insurance was almost three times higher at 7.35%.

In other words, Medicare is achieving success at controlling costs that private insurance is unable to match. Clearly, it is doing something right.

 

[Marshall]

Spending growth is the point of interest here. Even as utilization is returning post-recession spending growth is impressively low, in part because health care price inflation is so modest.

Couple those national figures with the continuing slowdown in Medicare spending growth in particular and there's plenty of reason for optimism.

Medicare costs have risen by an average of about 12% a year since the early 1970s, and they grew by about 9% a year between 2000 and 2009. But things started to change in 2010 according to the nonpartisan Congressional Budget Office. That year’s increase was only 4.3%. And in 2011, it was even lower, at 3.8%. Projections now put the growth rate in 2012 at close to zero.

The spending slowdown for Part B of the program, which covers physician and other outpatient services, has been especially dramatic. The program’s chief actuary sees spending growth declining to the lowest levels ever. [...]

So, is Medicare doing something right, or is its spending slowdown an aberration?

An answer may lie in a comparison with private insurance. According to an analysis by Standard and Poors (using a different methodology than CBO), in the 12 months starting in May 2010, spending growth moderated in both Medicare and the private sector. But under Medicare, the drop was much steeper. Medicare’s growth rate fell to a meager 2.6%, while the rate for private insurance was almost three times higher at 7.35%.

In other words, Medicare is achieving success at controlling costs that private insurance is unable to match. Clearly, it is doing something right.

It's easy to control costs when reimbursement rates are legislated. The result is lower cost for patients seen and fewer providers willing to see such patients. This results in fewer visits, many of which were unnecessary in the first place. Unfortunately, a few were necessary and the patient becomes either more gravely ill or worse. Of course worse reduces the monetary cost at the ultimate human cost.

Soon we will all have health insurance and no doctors to see. Happy Obamacare.