CMS: Health Spending Growth to Stay Slow in 2013

National healthcare spending growth will remain relatively slow at around 4 percent in 2013 but will accelerate starting next year, driven by the Patient Protection and Affordable Care Act, economic recovery and the aging population, according to a report by CMS analysts and economists published in Health Affairs.

In 2012, national healthcare expenditures reached an estimated $2.8 trillion and grew 3.9 percent, with the annual growth rate unchanged from 2011 because of the lingering effects of the recession, according to the report. Private health insurance spending growth held constant at 3.8 percent in 2011 and 2012 as a result of consumers' sensitivity to healthcare costs. Additionally, employers are increasingly offering health insurance benefits that involve higher cost sharing, such as high-deductible health plans.

Medicare spending growth fell to 4.6 percent in 2012 from 6.2 percent in 2011, in spite of enrollment growth. The report attributes this change to provider payment reductions under the PPACA and slower growth in the use of Medicare Part A hospital services. Furthermore, medical price inflation for total personal health care fell to 1.5 percent in 2012 from 2.1 percent in 2011, mostly because of a drop in prescription drug prices after the patents on several popular medications expired.

For the same reasons that slowed spending in 2012, private health insurance spending is projected to decrease further to 3.4 percent growth in 2013. Because of sequestration cuts, Medicare spending growth will also decrease to 4.2 percent.

However, the CMS economists expect overall growth in national health spending to speed up to 6.2 percent in 2014 as 11 million currently uninsured Americans gain coverage through Medicaid or the health insurance exchanges under the healthcare reform law. The growth rate is projected to stay near 6 percent in 2015 because of the continued effect of the PPACA as well as anticipated economic recovery.

From 2015 onward, continuing economic improvement and the aging baby boomer population's enrollment in Medicare will continue to drive spending growth, according to the report. From 2012 to 2022, national health spending is projected to grow at an average rate of 5.8 percent annually, 1 percent faster than the economy. Based on this estimate, CMS economists expect healthcare spending's share of the gross domestic product to increase from 17.9 percent in 2012 to approximately a fifth of the GDP in 2022.

Hospital spending growth in particular is expected to slow to 4.1 percent in 2013 from 4.9 percent in 2012, partly because of reduced Medicare spending under the healthcare reform law. CMS analysts then expect hospital spending to speed up to 4.7 percent in 2014. Due to improved economic conditions and increased Medicare enrollment as the population ages, hospital spending is expected to grow at an average annual rate of 6.3 percent from 2015 to 2022.

The economists' projections concerning Medicare focused on a hypothetical scenario where physician payment cuts under the program's sustainable growth rate don't go into effect, since Congress has temporarily bypassed the SGR so physicians would not have to endure double-digit cuts to their Medicare pay. "We emphasized the scenario in which Medicare physician payments, which are scheduled to be cut in 2014 under the sustainable growth rate, do not occur," CMS economist and lead author Gigi Cuckler said during a conference call.

The Congressional Budget Office also released a report this week that touches on healthcare spending projections. The CBO projected national healthcare spending will increase to approximately 22 percent of the gross domestic product by 2038 under current law. The CBO report assumes the SGR cuts will take effect.

More Articles on Healthcare Spending:
CBO: National Healthcare Spending to Increase to 22% of GDP by 2038
CBO: Bill Repealing Medicare SGR Would Cost $175B
Analysis: Why Are There Misunderstandings Around the Solvency of Medicare? 

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