Lower Managed Care Payments, Recession Slow Health Care Spending

The annual increase in U.S. spending on health care shrank to 3.9 percent in 2010, the lowest annual increase ever recorded by CMS, which issues an annual report on national health expenditures. The combination of the recession and decreased payments to Medicare Advantage plans contributed to the lower growth rate.

Spending on private health insurance increased just 2.6 percent in 2010 as the number of people enrolled in private insurance plans decreased by about 5 million people. Out-of-pocket spending on health care increased by just 1.8 percent.

Total national health spending hit an all-time high of $2.6 trillion in 2010. For the period 2010 through 2020, annual national health spending is expected to increase at an average of 5.8 percent per year. The health share of gross domestic product is expected to increase from 17.6 percent in 2009 to 19.8 percent in 2020.  By 2020, federal, state and local government health care spending will account for 50 percent of all national health spending.

The key year in the next decade is 2014, when many of the key provisions of the Patient Protection and Affordable Care Act (P.L. 111-148) go into effect. By 2020, almost 30 million more people will have access to some form of health insurance — either offered by private plans or through some government program.

CMS estimates that the biggest growth in health care expenditures after 2014 will come in the areas of prescription drugs and physician services, since most of the people who gain health coverage after 2014 will be younger and healthier than the population currently enrolled in Medicare, Medicaid, and private insurance.

The CMS report appeared on the website of the journal Health Affairs.