Health Care Spending Continues to Rise, But At a Slower Rate

Spending on health care continues to increase, albeit not at as high a rate as it once was. A report by the Altarum Institute found that in October 2012, national health expenditures (NHE) grew by 3.5 percent. In September 2012, the NHE grew by 3.7 percent.  Altarum takes the amount spent on health care in a month and calculates a seasonally adjusted annual rate (SAAR). The seasonally adjusted annual rate for all health care expenditures for 2012, based on an estimate of expenditures during October 2012, was determined to be $2.85 trillion.

Since December 2007, the Altarum Institute estimates, real health spending has increased 11.5 percent, or 2.3 percent per year. During that same time period the gross domestic product decreased by 7 percent. Although spending in the economy overall has decreased, spending on health care has continued to increase, although not at the same rate that it once did. In 2002, the rate of growth of the NHE was a little more than 10 percent. Since that time the increase in NHE has steadily decreased to the 3.5 percent that is currently estimated.

Provider type

The amount spent increased for all types of health care from October 2011. The SAAR spent on hospitals for 2012 was $904.1 billion. This was an increase from a SAAR of  $874.1 billion determined from estimated expenditures in October 2011. The second largest category of spending was on physician services where a SAAR of $548.6 billion was determined compared to a SAAR of $539.9 billion based on October 2011 estimates. These spending estimates include all expenditures from Medicare, Medicaid, private insurers and cash payments.

Largest increases

The SAAR for spending on durable medical equipment (DME) had the largest percentage change from October 2011 to October 2012, increasing by 6.8 percent.  The SAAR for DME estimated based on October 2012 expenditures was $42.9 billion, and in October 2011 the SAAR for DME was $40.2 billion. Spending on home health care also had a significant increase of 4.1 percent with an estimated SAAR of $76.6 billion in October 2012, up from a SAAR of $73.5 billion based on estimates of expenditures from October 2011. Spending on nursing home services remained about the same at roughly $151 billion in SAAR during both years.

Spending on hospital care accounts for 32 percent of all spending, according to the Altarum Institute. The second largest category of spending is on physician services at 19 percent followed by spending on prescription drugs at 10 percent. Spending on post-acute care services accounts for 8 percent of all spending on health care, with 5 percent being spent on care received at nursing homes and 3 percent spent on care provided by home health agencies.

Administrative costs

The amount spent on administration and net cost of private health insurance increased from  a SAAR of $189 billion based on an estimate of expenditures in October 2011 to a SAAR of $205 billion in 2012, an 8.6 percent increase. Spending on government health activities also experienced a large increase of 5.1 percent from October 2011 to October 2012, with the SAAR increasing from $87.8 billion to $92.3 billion.