Published on January 8, 2014

Healthcare expenditures continue to increase modestly: CMS

By Jerry Geisel, Crain News Service

WASHINGTON (Jan. 8, 2014) — U.S. healthcare expenditures increased modestly in 2012 as very small spending increases on prescription drugs mitigated higher cost increases for hospital and physician services, the Centers for Medicare and Medicaid Services (CMS) said Jan. 6.

Total U.S. healthcare spending hit $2.793 trillion in 2012, the latest government data available, or $8,915 per person. While total expenditures were a record, the 3.7 percent increase in 2012 was in line with a 3.6 percent increase in 2011 and a 3.8 percent increase in 2010, according to statistics that CMS researchers compiled and published in the journal Health Affairs.

Those annual percentage increases were the lowest in the 53 years that government researchers have tracked and compiled such information.

“The relative stability since 2009 primarily reflects the lagged impacts of the recent severe economic recession,” the report said. “In particular, income and employment growth was modest over this period, and there was a slow recovery from private health insurance enrollment losses during 2008-2010,” the report added.

In addition, healthcare expenditures as a portion of the gross domestic product dipped for the second year in a row, dropping to 17.2 percent of GDP in 2012, down from 17.3 percent in 2011 and 17.4 percent in 2010.

Spending on private health insurance premiums increased modestly to $917.0 billion. The 2012 increase of 3.2 percent is in line with a 3.4-percent increase in 2011 and a 3.2-percent rise in 2010.

High-deductible plan growth

One factor that has helped to hold down healthcare premiums has been the growth in enrollment in consumer-driven high-deductible healthcare premiums (CDHPs), where premiums are sharply lower than other plans. In fact, a Mercer L.L.C. survey last year found that premiums were about 20 percent less in CDHPs linked to health savings accounts or health reimbursement arrangements than traditional plans, such as preferred provider organization plans.

In all, 19 percent of covered workers were enrolled in CDHPs in 2012, according to the report, up from 17 percent in 2011 and 8 percent in 2008.

The cost of prescription drugs continued to increase modesty and at much lower rate compared with recent years—increasing just 0.4 percent in 2012 compared with 2.5 percent in 2011. As recently as 2009, prescription drug costs rose at a nearly 5 percent annual clip.

The CMS report attributes the slowdown in prescription drug costs to the loss of patent protection for “for brand-name blockbuster drugs” such as Lipitor, Plavix and Singulair in late 2011 and in 2012.

By contrast, spending on physician and clinical services jumped by 4.6 percent in 2012, compared with 4.1 percent in 2011. The report attributes the higher spending to an “acceleration in the use and intensity of physician services.”

In addition, spending on hospital care climbed 4.9 percent in 2012, up from 3.4 percent in 2011. The increase, the report noted, is the result of hospitals boosting their charges as well as greater use of services.

This report appeared in Crain’s Business Insurance magazine, a Chicago-based sister publication of Tire Business.

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