Health care spending grows at slower rate

WASHINGTON – U.S. health care spending in 2010 grew at the second-slowest rate in 51 years, as patients continued to postpone hospitalizations, fill fewer drug prescriptions and avoid doctor visits in the aftermath of the Great Recession, according to a government report released Monday.

Because health care is considered a necessity, slowdowns in spending for medical services typically emerge about two years after an economic downturn. But high unemployment, the loss of job-based health coverage and plummeting household incomes caused national health spending to slow almost immediately after the Great Recession began in December 2007.

As insurers shift more costs to patients and more employers drop or cut health insurance offerings, the use of medical services continues to decline.

Public and private spending for health care totaled nearly $2.6 trillion in 2010, or $8,402 per person, according to the Department of Health and Human Services. That is up from nearly $2.5 trillion, or $8,149 per person, in 2009.

The 3.9 percent growth in spending was the second-smallest annual growth rate since the data was first tracked in 1960. Only 2009's 3.8 percent increase was smaller, said Anne Martin, an HHS economist.

Because gross domestic product and health care spending grew at similar rates in 2009 and 2010, the share of the GDP devoted to health care spending remained stable both years, at 17.9 percent.

Of every dollar spent on health care in America, private insurance pays about 33 cents, Medicare pays 20 cents, and state and federal Medicaid payments account for about 15 cents. Patient out-of-pocket payments account for about 12 cents, with the rest coming from a mix of third-party payers and various government programs.

Provisions of the 2010 Affordable Care Act had "minimal impact" on health spending that year, Martin said. That's because major provisions of the act, such as the expansion of Medicaid coverage for the poor and the creation of state health insurance exchanges, won't begin until 2014.

Retail prescription drug spending – the third-largest share of health spending, behind hospital care and physician and clinical services – grew only 1.2 percent in 2010, the lowest annual growth rate ever.

Along with fewer drugs consumed, the continued use of cheaper generic medications and the loss of patent protection on certain brand-name drugs drove spending downward. In addition, fewer new drugs were introduced in 2010.

Premiums and benefit outlays for private health insurance, which includes job-based coverage and privately purchased coverage, both saw slower growth rates in 2010. The 1.6 percent growth in benefit payments for private coverage was the smallest increase ever recorded, as job losses continued to fuel enrollment declines.

In 2009, private insurance enrollment fell 2.9 percent as 5.7 million people lost coverage. Another 3.7 million lost coverage in 2010, producing a 1.9 percent decline in enrollment, Martin said.

Other findings from the report:

• Medicare spending grew 5 percent in 2010, down from 7 percent in 2009. A slowdown in spending for Medicare managed-care programs triggered the decline.

• Medicaid spending totaled $401.4 billion in 2010, up 7.2 percent from 2009.

• Spending for home health care totaled $70.2 billion in 2010 and was one of the fastest-growing segments of the health care industry, growing 6.2 percent in 2010 and 7.5 percent in 2009.

• Read more articles by Tony Pugh

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