Slower Growth in Health Care Spending Continued in 2011

The CMS Actuary has found that health care spending continued to grow slowly in 2011. In an article published in the January, 2013 issue of Health Affairs, the Actuary analyzed changes in various categories of health care spending and noted that the recession continued to dampen personal spending because many people remain uninsured. Nationally, total health care spending in 2011 was $2.7 trillion, up 3.9 percent from 2010. Expenditures for health care grew at about the same rate as the gross domestic product (GDP), which was 4.0 percent. As a result, the percentage of the GDP attributable to health care remained at 17.9 percent. Growth in spending was not evenly spread among types of services or categories of payers, however.

The number of people with private health insurance grew by 1 million in 2011, largely because 2.7 million young adults were added as dependents to their parents’ health insurance policies due to the requirement of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) to cover dependents up to age 26. This growth followed a drop of 11.2 million in the number of insured from 2007 to 2010. Spending for premiums grew 3.8 percent in 2011; the net ratio of premiums to benefits remained constant at 12.3 percent. An increase in the cost of group health insurance was offset by a decline in the net cost of individual policies resulting from the implementation of the medical loss ratio requirement.

Spending on physician and clinical services grew more quickly in 2011 than in 2010, reflecting both an increase in doctor visits and increased acuity of services. Expenditures for clinical services grew twice as much as for physician services, 7.2 percent and 3.6 percent, respectively. The growth in spending for hospital services declined.

Among payers, Medicare spending grew faster because of a temporary increase in payment rates for skilled nursing facilities and greater use of physician services and clinical services. In addition, Medicare enrollment began to grow as the first baby boomers reached age 65. The federal share of Medicaid spending declined, and the state share grew, because the temporary increase in the federal medical assistance percentage (FMAP) under the American Reinvestment and Recovery Act (P.L. 111-5) expired in 2011.

The growth of expenditures for prescription drugs slowed dramatically. An unusually high number of patents for brand name drugs expired, so that new generics became available. This accelerated the increase in the use of generic drugs generally. The 50 percent discount on Part D prescription drugs for Medicare beneficiaries who reach the “donut hole” reduced consumer spending on drugs. The increase in prescription drug rebates under PPACA further lowered net expenditures.

Rovner Opposes Injunction Barring Enforcement of Contraception Mandate

In a split opinion on December 28, 2012, the 7th Circuit granted Cyril and Jane Korte and their construction company an injunction pendng appeal enjoining the government from enforcing the provision of the Patient Protection and Affordable Care Act (P.L. 111-148) that requires the company to purchase an employee health insurance plan that includes no cost-sharing coverage for contraception procedures (42 U.S.C §300gg-13(a)(4)). Judges Joel M. Flaum and Diane S. Sykes concluded that the Kortes established a reasonable likelihood of success on the merits of their Religious Freedom Restoration Act (RFRA) claim and irreparable harm and that the balance of harms tips in theirs favor. Judge Ilana Rovner dissented, however, stating that she would deny the Kortes emergency request for temporary injunctive relief because she did not believe that the Kortes demonstrated either a reasonable likelihood of success on the merits of their appeal or irreparable harm in the absence of an injunction pending the resolution of the appeal.

Rovner’s conclusion was that the Kortes did not show that complying with the contraceptive mandate substantially burdens the free exercise of their religious rights in violation of the RFRA. Although the Kortes contend that complying with the PPACA contraception mandate violates their religious liberties, Rovner explains how they are multiple steps from the contraceptive services to which they object. First, the corporation rather than the Kortes will pay for the insurance coverage. Second, the company will not be paying for the contraceptive services directly, it will be paying for insurance that covers a wide range of health care services. Finally, if the employee avails herself of contraceptive services, the insurer will be funding the services, not the Kortes.

As Rovner sees it, “What the Kortes wish to do is preemptively declare that their company need not pay for insurance which covers particular types of medical care to which they object, despite that neither the company nor its owners are involved with the decision to use particular services, nor do they write the checks to pay the providers for those services.”  According to Rovner, if an employer has this right, it is not clear what limits there might be on the ability to limit the insurance coverage provided to employees when medical services are inconsistent with the employer’s or owner’s individual religious beliefs.

Rovner also expressed uncertainty as to whether the Kortes will be irreparably harmed in the absence of a temporary injunction that would relieve them of the obligation to comply with the mandate to purchase insurance covering contraceptive services. She noted that the Kortes have been paying for an insurance plan that includes contraceptive services for at least one year. In addition, she stated that the regulations imposing the contraceptive mandate were issued in August of 2011 but the Kortes waited for more than a year to file their suit for a preliminary injunction relieving them of the duty to comply with the statute and regulations. In her opinion, the Kortes belated discovery that the company  voluntarily has been providing its employees with coverage for the contraceptive services they claim are contrary to their religious beliefs coupled with their tardy decision to file suit seeking injunctive relief suggests that they will not be irreparably harmed if they are denied a preliminary injunction and continue to pay for the same coverage in compliance with PPACA while their appeal is being resolved.

See Korte v Sebelius, No. 12-3841, (7th Cir. 2012).