Health Care Spending Grew, But at a Slower Rate, in 2010

According to Marilyn Tavenner, acting CMS administrator, “[CMS has] worked hard since the passage of the Affordable Care Act in 2010 to lower health care cost growth.”  In a press release announced by CMS on January 9, 2012, the results of the annual report of the national health expenditures (NHE) showed that health care spending grew at a slower rate during 2009 and 2010 than in the 50 plus years the reports have been compiled.  From Tavenner’s statement, it seems that CMS credits, at least in part, the Affordable Care Act [Patient
Protection and Affordable Care Act (PPACA) (P.L. 111-148)] with the low rate of increase.  She went on to affirm that CMS “[believes] that the tools in health reform will help keep health care cost growth low while improving the value of care for consumers.”

2010 NHE Findings

Health care spending grew only 3.9 percent in 2010, up only slightly from the 3.8 percent growth in 2009.  That amounts to $8,402 spent per person and $2.6 trillion total, 17.9 percent of the gross national product in 2010, according to the press release and the highlights of the report.

Personal health care spending. The highlights noted the following:

  • Hospital care spending increased 4.9 percent ($814 billion) in 2010, despite the average annual increase being 5.5 percent from 2007 to 2010 and 7.4 between 2003 to 2006.  The report also noted that growth private health insurance spending for hospital services slowed in 2010, while there was a slower increase in inpatient hospital admissions visits to emergency departments and outpatient hospitals visits.
  • $515.5 billion was spend on physician and clinical services in 2010, an increase of 2.5 percent, down from the 3.3 percent growth in 2009.  There were fewer total physician visits between 2009 and 2010.
  • Spending for other types of professional services, such as physical therapy, chiropractic medicine, and mental health, experienced a growth rate of 3.6 percent, down slightly from the 3.8 percent growth in 2009.
  • A 2.3 percent growth in dental service expenditures was reported, up from the 0.1 percent growth in 2009.
  • Other health, residential and personal care services, such as those provided in non-traditional settings, ambulance providers, and residential mental health and substance abuse facilities, saw an increase in spending of 5.3 percent, $128.5 million, down from 7.7 percent in 2009.
  • Home health care spending had a growth of 6.2 percent, down from a 7.5 percent increase in the previous year.
  • Nursing care facilities and continuing care retirement communities increased by only 3.2 percent ($143.1 billion), after a 4.5 percent growth in 2009.
  • Prescription drug spending saw an increase of 1.2 percent ($259.1 billion), when the growth was 5.1 percent in 2009.  This was due to a reduced growth in the amount of drugs taken, more use of generics, loss of patent protection for some brand name drugs, fewer new drugs, and a big increase in Medicaid prescription drug rebates.
  • Durable medical equipment (i.e., eyeglasses, contacts, and hearing aids) spending increased 7.3 percent, while 2009 saw a growth of only 0.8 percent.
  • Spending for non-durable medical goods (i.e., over-the-counter medicines) experienced no growth since 2009.

Health care funding. 

According to the press release and the highlights of the report, Medicare spending increased five percent in 2010 ($524.6 billion) down from the seven percent increase in 2009, including a five percent increase in spending for fee-for-service Medicare and a 4.7 percent increase in Medicare Advantage (MA) spending.  Medicaid spending growth was 7.2 percent ($401.4 billion), down from the 8.9 percent growth seen in 2009.  Approximately $41 billion in increased Federal Medical Assistance Percentages (FMAP), provided under the American Recovery and Reinvestment Act of 2009 (ARRA) (P.L. 111-5), resulted in Federal Medicaid expenditures increasing by 8.9 percent, while state Medicaid expenditures grew 3.9 percent.  The increase in private health insurance premiums was down in 2010, too, to 2.4 percent from 2.6 percent the previous year, which the report claims is due to lower private health insurance enrollment, increases in cost sharing, and switching to lower premiums plans.  Out-of-pocket spending increased by 1.8 percent, after a mere 0.2 percent increase in 2009.  This increase could have been caused by higher cost-sharing, switching to lower premium plans  with higher deductibles and copayments, and loss of coverage.

Overall, the federal government financed 29 percent of the U.S. health care spending in 2010, up from the 23 percent it financed in 2007.  Some of the increase can be blamed on the expiration of the enhanced federal matching funds for state medicaid programs that expired in 2011.

National Health Expenditures Annual Report

CMS’ Office of the Actuary has prepared the NHE report yearly since 1960, and measures such aspects of health care spending as the cost of health care goods and services, public health initiatives, administration, health insurance, and health care investments.  The estimates are based on the most current data sources available.

More details on the NHE report can be found on the CMS’ NHE page.