TOPICS > Health

What’s Slowing Down Americans’ Health Care Spending?

January 9, 2012 at 12:00 AM EST
A new government report shows that the rise in health care spending slowed for the second consecutive year. Meanwhile, health insurance premiums continue to climb as workers pay an ever-growing share of the cost. Ray Suarez discusses what's behind these changes with Susan Dentzer of Health Affairs.
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JUDY WOODRUFF: Finally tonight, what’s slowing down the rise of health care spending?

Ray Suarez takes a look.

RAY SUAREZ: It’s often reported that Americans spend more on health care than the citizens of any other industrialized country. What’s also been true for many years is that the cost of health care has risen much faster than the cost of living overall.

Now a new report from the government shows the rise has slowed for the second consecutive year. It found that health care spending grew by 3.9 percent for 2010, the most recent year on record. That’s just a shade higher than in 2009. Still, the total amount spent in 2010 was $2.6 trillion dollars, or about $8,400 a person.

Moreover, health insurance premiums continue to climb, while workers are paying an ever-growing share of the money.

To help flesh out what’s behind these changes, we check in with Susan Dentzer. She’s editor in chief of the journal “Health Affairs,” where the report was published today. She’s also an analyst for the NewsHour.

And, Susan, at 3.9 percent up, it’s still going up much faster than the cost of living. But that’s considered a tame number. Is it?

SUSAN DENTZER: It really is, Ray. And if you compare it to prior years, you can really see the difference.

For example, in 1980, the rate of growth of health spending jumped in one year by 13 percent. In 1990, it jumped by 11 percent in one year. In recent years, we’ve seen that rate of growth slow. These two most recent years, 2009 and 2010, represent the slowest rate of national health spending growth in 51 years.

Now, we know why that happened, largely. It’s because the economy plummeted in 2009. We had the first decline in overall gross domestic product in 2009 than we’ve had in 60 years.

RAY SUAREZ: So, unpack that number. When you say we know why it happened, and it’s the economy, were people buying less health care or able to pay less for it?

SUSAN DENTZER: Both.

RAY SUAREZ: Both.

SUSAN DENTZER: Exactly. Across the board, we see people were going to the doctor less. People were going to the hospital less. People were getting less outpatient surgery.

We had the slowest rate of growth in prescription drug spending in years. Retail prescription drug spending went up only 1.2 percent in one year. And that’s over and against years that we have had relatively recently of 18 percent annual rates of increase.

So across the board in almost every sector, if there was an earthquake in the economy in 2009, the aftershocks were felt in health care well into 2010.

RAY SUAREZ: Now, 2010 was also the first year of the Obama administration’s health care reform. Their stated intention was to bend the cost curve. Did that have anything to do with this lower spending?

SUSAN DENTZER: No.

But it’s also true that anything that happened out of the Affordable Care Act had a negligible impact on all of this in 2010. The CMS actuaries, Centers for Medicare and Medicaid Services actuaries, say that the overall contribution of the Affordable Care Act was 0.1 percentage points as a contributor to the overall 3.9 percentage points of increase.

So it was negligible. Now, we know that most of the Affordable Care Act is yet to come. The big expenditures will hit in 2014, when we expand health insurance coverage, open up the new health insurance exchanges, expand Medicaid, et cetera, but, so far, very little impact.

RAY SUAREZ: One part of the economic effect which is directly tied to health insurance is employment. 2010 was a very high unemployment year. Did that drive people to more expensive ways of getting health care coverage or just keep them home, instead of going to the doctor?

SUSAN DENTZER: It pretty much kept them home. Not only did we have the highest rate of unemployment in 27 years, people also lost health coverage because of that. Private health insurance coverage declined almost 2 percent in the one year from 2009 to 2010.

And, of course, it had declined in the prior year as well. So people were losing their jobs, losing their health care coverage, having to pay more. Those people who did have coverage have had to pay more. We know that employers have been shifting more of the costs of health care to workers.

So, now if you go to the physician or if you go to the hospital, the likelihood is that you’re going to have a higher co-insurance rate. You’re going to pay more of that bill directly yourself. So all of those things came together. And it meant truly people went to the emergency department less. People went to doctor’s offices less. People did less elective surgery in hospitals.

You can see that clearly in the rate of hospital use in 2010. So the economy in health care got hit as hard as the economy anyplace else.

RAY SUAREZ: But in that $2.6 trillion overall national health care bill, wasn’t the federal government on the hook for more of it at the same time as well?

SUSAN DENTZER: Yes, indeed, in particular because of the stimulus law that was passed in 2009, which had the federal government pick up more of the share of Medicaid spending, Medicaid, of course, being the program that largely covers the poor and also some of the long-term care needs of the aged and disabled.

We know that the federal government kicked in more to help the states out through the worst period of the economic downturn. That did result in higher spending. But, even so, Medicaid spending in 2010 was still only up 7 percent which was much lower than it’s been in prior years.

And if we look on a per-person basis, per person, in Medicaid, spending only went up 1.2 percentage points. So that’s again a really low rate of spending per person relative to what we have seen as the historical norm in this country.

RAY SUAREZ: Two interesting pieces of data jumped out at me from the report. One was that co-pays were higher for things like prescription drugs. And, of course, insurance, the raw cost of insurance itself was higher. Yet, the household share of the overall national bill was lower.

Is that because other people in the chain were picking up more at the same time?

SUSAN DENTZER: Well, partly it’s again this effect of the federal government stepping in and paying more of the Medicaid bills of the country in particular.

And, of course, we know people continue to qualify for Medicare, so that is rising as well. So there was this temporary adjustment of the federal government kicking in more money toward health care over that period.

But, as you say, a larger effect here going on is that people are having to pay more for health care out of pocket. To the degree that that persists, of course, the big question people are now asking is, what’s going to happen when the economy comes back? Does all of this get thrown into reverse?

RAY SUAREZ: So, answer your question. What is going to happen when the economy comes back?

SUSAN DENTZER: Well, we don’t know.

But if some of these things are just due to the economy and if people get employed and get insurance health insurance again — and, of course, we have the big health insurance expansion coming down the line in 2014 — it could throw all of this into reverse. And we could see health expenditures going up much more quickly.

In fact, that’s what we’re expecting now in 2014. On the other hand, if some of these things — changes are more fundamental, if shifting more of the cost to individuals is making them more cost-conscious about health care, less likely to go to an emergency room when they could get care that they need, say, at an urgent care clinic, those could have more lasting effects. We’ll have to see how all of this plays out.

RAY SUAREZ: Susan Dentzer, good to talk with you.

SUSAN DENTZER: Great to be with you, Ray.