Revised federal data show U.S. healthcare spending growth hit 53-year low in 2013

U.S. healthcare spending apparently grew more slowly last year than at any time in the past half-century—including the Great Recession—as Medicare squeezed outlays, millions of Americans continued to go without health insurance and those with health plans spent at a slower pace on hospitals, clinics and pharmacies.

The nation spent $2.9 trillion on healthcare last year, an increase of 3.6% from the prior year and the weakest growth since 1960, after federal actuaries and economists revised recent estimates. That spending remained weak in 2013 was not surprising: U.S. health spending growth fell below 4% in 2009 with the recession that stripped private health insurance from millions of individuals. But newly revised numbers show an acceleration in 2012 to 4.1% before a slump last year.

The slump is not expected to last with the start in January of health reform's push to reduce the number of uninsured, some contend. Indicators of spending so far this year are mixed, however. Major hospital chains have reported fewer uninsured and healthier margins, particularly in states that expanded Medicaid. But quarterly national estimates put health spending growth below 4%.

As a percentage of the economy, health spending last year remained at 17.4% of the gross domestic product. Last year's slowdown can be traced to the recession, changes in health benefits and the Patient Protection and Affordable Care Act, federal officials who produced the latest estimate wrote in the journal Health Affairs, which published the snapshot of 2013 spending on Wednesday.

Commercial health plan enrollment plunged by 11.2 million with the recession, which ended more than five years ago, and had barely rebounded as of last year, when it grew 0.7%. Slower growth in private health insurance spending, aided in part by the growing prevalence of high-deductible health plans, contributed to the sluggish health spending growth in 2013, said Micah Hartman, a federal statistician with the CMS who helped produce the estimate of last year's spending. High-deductible health plans are 9% to 12% less costly than preferred provider plans and shift more of the cost of care to households.

Slower private health plan spending for hospital, physician and clinical service also contributed to last year's slump, which federal officials said could be in part due to more patients grappling with high deductibles.

Spending for private health insurance premiums decelerated to 2.8% from 4% in 2012. Spending for private health plan benefits also grew more slowly in 2013, 2.8% from 4.4% the prior year.

Medicare spending cuts contained in the Affordable Care Act helped slow Medicare spending growth, as did a smaller number of baby boomers entering the program after an enrollment rush in 2012. Medicare spending increased less rapidly in 2013, 3.4% from 4% the prior year.

Healthcare inflation slowed in 2012 as Medicare curbed its spending under the Patient Protection and Affordable Care Act.

Health reform reduced the amount by which Medicare increases payments each year to offset the rising cost of running hospitals and clinics and other services. The cuts began in 2011 and continue through 2019.

Other legislative cuts to federal spending helped as well. The fiscal fix known as the sequester added to health reform's Medicare cuts in 2013, further reducing what Medicare pays hospitals, doctors and other providers by 2%.

Health spending did not fall with weaker inflation, however, as demand for medical care began to rebound in 2012 and continued last year.

The use of hospitals, laboratories and other healthcare plunged with the recession, as did the healthcare sector's investment in technology and construction to upgrade or expand services. These costs are a measure of the demand for care and the intensity of treatment, and such expenses increased 1.1% in 2012 and again in 2013 after barely perceptible 0.1 percentage point contribution to the average per capita health spending growth of 3.1% from the year the recession ended to 2011.

How sharply health spending may rebound has been intensely debated among economists and policymakers divided over the influence the weak economy has exerted over health spending. Some credit the soft economy for the continued slow health spending; others say pressure on hospitals, doctors and other providers to increase efficiency and new incentives to do so has lowered the cost of healthcare.

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