Growth rate for U.S. health tab may have hit bottom

U.S. health care spending grew by the slowest rate in more than a half-century last year, government analysts said Wednesday. But a speed-up is coming as the economy finally gets traction and the new health care law covers more people.

The nation's health care tab grew by just 3.6 percent in 2013, nonpartisan economic experts with the Health and Human Services department said in their report. That's the lowest annual increase going back to 1960, when the government began measuring.

The slow growth is mainly due to an uncertain recovery from the deep economic recession, the analysis suggested. Employers shifting workers to health plans that can expose them to higher out-of-pocket costs also played a part.

President Barack Obama's health care law was not yet fully implemented in 2013. It seems to have had a push-and-pull effect on spending that year, holding costs down in some areas and nudging them higher in others.

"The key question is whether health spending growth will accelerate once economic conditions improve significantly," said the report from the Office of the Actuary, a numbers-crunching unit of the Centers for Medicare and Medicaid Services. "Historical evidence suggests that it will."

Overall, the nation spent $2.9 trillion on health care in 2013, from hospital and doctor bills, to prescriptions and nursing home care. That worked out to $9,255 per person, said the report, a figure well above what any other economically advanced country spends.

In practice, a small fraction of people—those who are the sickest—account for the majority of spending. Roughly 30 percent of Medicare spending goes for patients in their last year of life, a share that does not seem to change much over time.

The report found that health care spending in 2013 remained stable as a share of the total U.S. economy, accounting for 17.4 percent. That finding is important, because if health care returns to a pattern of outpacing economic growth, programs like Medicare, Medicaid, and the new health care law will become harder to pay for. Private insurance could also become cost prohibitive.

Growth slowed in several key areas, including hospital care, doctors' services, Medicare spending, private health insurance, and out-of-pocket spending by consumers, including deductibles and copayments. Hospital care and physician services are the two biggest items in the spending column.

Spending growth accelerated for prescription drugs and for Medicaid. New medications and price increases for brand name and specialty drugs accounted for much of the speed-up. Medicaid enrollment increased, as several states took advantage of an option under Obama's law for early expansion of the health insurance program for low-income people. The Affordable Care Act also temporarily increased Medicaid payments to primary-care doctors.

The Medicaid example helps illustrate the competing effects of the health care law. Although it pushed Medicaid spending up, the law's Medicare cuts to hospitals and private Medicare Advantage plans helped pull spending growth down. A 2-percent across-the-board Medicare cut as a result of the federal budget sequester also tamped down spending.

The analysts said they did not calculate the net impact of the health care law.

With an estimated 10 million people gaining health insurance just this year as the law's big coverage expansion got underway, there's little doubt that spending will pick up going forward. The question is by how much. Growth rates approaching double digits would be widely seen as unsustainable.

The report said "the balance of (many) factors over the next few years will determine how the historically low health spending growth from 2009 to 2013 is viewed: as the temporary aftermath of the great recession or the beginning of a new era."

The study was published online by the journal Health Affairs.